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Premier fund locks in capital

Premier Fund Managers has introduced the second issue of the Premier income and growth plan, a Dublin-based closed-ended fund that is linked to the FTSE 100 index for four years.

Investors can choose an annual income of 7.5 per cent, monthly income of 0.6 per cent or growth of 32 per cent at the end of the term. The original capital will also be returned, providing the FTSE 100 index does not fall by more than 25 per cent. Where this does happen, there are two safety nets to ensure investors will still get their capital back.

The first is where the index falls beyond 25 per cent during the term but recovers to at least its starting level by the end of the term. The second is where the index rises by 40 per cent or more at any time during the term, which will override a fall of 25 per cent even if the index fails to recover by the end of the term.

Where both safety nets fails to kick in, the capital will be reduced by 2 per cent for every 1 per cent fall in the index. To calculate the final returns, the closing value is recorded at the start of the term and is compared with the lowest closing level of the index during the last six weeks of the term.

The lock-in feature for investors&#39 capital that applies where the index rises by at least 40 per cent could be useful if stockmarkets are on the way up. However, the lock-in may not be achievable within a four-year term and the heavy losses that investors could sustain if both safety nets fail make this product unsuitable for very cautious investors.

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