HSBC and Zurich have both established capital-protected bonds that could mature earlier than the investment term if the FTSE 100 index reaches a certain level at specified points. Both products return investors' original capital regardless of the index performance.
HSBC's capital and growth plan has a six-year term but could mature in year three. The closing level of the FTSE 100 index is taken on May 16, 2003 and compared with the closing level on May 19, 2006. If it has grown by at least 21 per cent, investors would come away with a 121 per cent return.
If this level of growth is not achieved, the investment term will continue, but will terminate in year five if the index has grown by at least 55 per cent. Investors would get a 155 per cent return if this happens, but if this does not happen, the product will run for the full six years. An average is taken of the FTSE 100 index over the last 12 months of the term and investors get 100 per cent of this growth.
Zurich's guaranteed account has a term of five years and six months, but will mature in year three, giving a return of 130 per cent, if the index has risen by at least 30 per cent. If this does not happen, it will run for the full five and half years and investors will get a 200 per cent return. This is calculated by the use of a 12-month average over the final 12 months of the term.
Both products could terminate in the third year, but the Zurich product provides higher returns. The HSBC product also has an additional early maturity trigger point, which may reduce the likelihood of a 200 per cent return when the bond lasts the full term.