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NDF&#39s 6th sense for income & growth

NDF Administration has brought in the sixth version of its extra income & growth plan.

The plan is a guaranteed income and growth bond, with Abbey National Treasury Services providing the investment management. Investors will buy shares in Census, an investment company based in Ireland, which will then invest in the Nikkei 225 index over a three-year period.

The capital is not guaranteed though. If the Nikkei 225 index falls by 20 per cent over the three-year term, investors’ capital will reduce by one per cent for every one per cent fall in the index. Should the index fall by more than 20 per cent, the capital reduces by two per cent for each one per cent fall beyond 20 per cent.

The doubling of capital erosion when the index falls by more than 20 per cent is very steep and is likely to penalise investors further in the event of a sustained fall in the index. Although the Japanese stockmarket has been struggling to recover from a long and persistent recession, it has been hit recently by more volatility, caused by rising oil prices.

This product is best suited to adventurous investors who understand the degree of risk that the extra income & growth plan offers.

According to Standard & Poor’s the Nikkei 225 index fell from 16,791 points on February 16, 1998, to 13,119 points on February 19, 2001.

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