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NDF offers remedy to loss

NDF Administration is aiming the NDF protected growth plan at investors who want to recoup losses made in the current environment of low equity returns.

This guaranteed equity bond has a five-year term and offers investors 100 per cent of the growth in the FTSE 100 index. All of the original capital is returned to investors as long as the FTSE 100 index does not fall by more than 50 per cent without recovering by the end of the term. Where this does happen, investors’ capital will be reduced by 1 per cent for each 1 per cent fall in the index.

To calculate the returns, the closing level of the FTSE 100 index is recorded on October 4, 2002 and this is compared with an average taken between September 5, 2007 and October 2, 2007.

The advantage this product has over some guaranteed equity bonds is that investors get all the growth in the FTSE 100, plus a degree of capital protection. Some bonds such as Bristol & West’s global guaranteed equity bond offer an unconditional guarantee, but this caps growth at 70 per cent.

However, it is possible to find products which offer 100 per cent growth and return the original capital regardless of index performance. One example is the Birmingham Midshires guaranteed five-year tracker account (Issue 9). This product is less risky than the NDF bond, as investors do not face the possibility of capital erosion if the stockmarket fails to perform over the next five years.

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