NDF Administration has established a guaranteed equity bond that provides investors with a choice of annual and monthly income linked to either the FTSE 100 or Dow Jones Eurostoxx 50 indices.
The bond has a term of five years and two months. Investors who choose to link their investment to the FTSE 100 can choose annual income of 6 per cent gross a year or monthly income of 0.47 per cent gross. Those who opt for the Dow Jones Eurostoxx 50 index can select annual income of 7 per cent or monthly income of 0.54 per cent gross.
Investors' original capital will be returned in full provided the chosen index does not fall by more than 50 per cent between May 12, 2003 and July 7, 2008 without recovering to its starting value on May 9, 2003. If the index falls by this amount without recovering, capital will be reduced by 1 per cent for each 1 per cent fall in the index.
Although the conditional capital guarantee is the same whatever index is chosen, some investors may prefer the familiarity of the FTSE 100 index. Others may prefer the higher returns through the Dow Jones Eurostoxx 50, which contains fewer stocks.
Monthly income investors who want to link their investment to European stocks would get higher income from the Premier extra growth plan, which has a five-year term. Its annual income option is the same as offered by NDF, but capital will be reduced if the index falls by more than 30 per cent.
Norwich Union's Prosper income also provides similar returns to the NDF bond, but again, the level of capital protection is lower since it allows for falls of up to 30 per cent before capital is at risk.