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Merrill Lynch income and growth product offers annual 8.25% yield

Merrill Lynch Investment Managers has set up a protected income and growth product offering a yield of up to 8.25 per cent a year.

The Merrill Lynch def-ined returns 2 fund opens from October 29 until the end of November.

The product offers two share classes – income and zero-dividend preference shares – and is linked to the performance of 30 blue-chip pan-European stocks.

The income shares offer a dividend yield of 8.25 per cent, paid quarterly over three years. Capital is protected unless any of the shares finish the plan&#39s three-year life at lower than 90 per cent of their initial value.

The zero shares offer a return of up to 26.85 per cent over three years. However, capital is eroded if any of the stocks fall below 80 per cent of their starting value and fail to recover to their initial value.

The fund has no explicit charges. Commission is up to 3 per cent. Minimum investment is £7,000 and the product qualifies for both Isa and Pep transfers.

MLIM says the product has been inspired by a search for transparent lowrisk returns in the current volatile markets.

Director of equity markets David Curry says: “We are exchanging the possibility of share price upside in return for predictable returns and a degree of downside protection. We are creating something that is clearly risk-averse and clearly transparent.”

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