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Premier links to Europe

Premier Fund Managers has brought out the Pan-European Growth Plan – Limited Editions No 27.

This capital-protected bond is linked to the FTSE 100 for a term of six years, but there are early maturity trigger points at each year during the term.

The product has the potential to produce a return of 7.5 per cent a year. If the FTSE 100 index is at least 5 per cent higher at the end of year three compared with the starting level the product will mature and investors will receive growth of 22.5 per cent of their original capital.

Payouts for the remainder of the term are growth of 30
per cent of the original investment if the product matures in year four, growth of 37.5 per cent of the original investment if the product matures in year five and 45 per cent growth at the end of year six.

Investors will also get a full capital return at maturity provided the indices do not fall by 50 per cent or more without recovering to their initial levels. If this safety net fails, investors will lose 1 per cent of their original capital for each 1 per cent fall in the index.

Although some investors will like the flexibility of not necessarily having their money tied up for the full six years, while basing returns on a percentage of their original investment rather than a percentage of the growth in the index, a potential downside is that it is impossible to know in advance when the product will mature.

The other potential drawback is that although there is an element of capital protection, the product only offers soft protection based on the performance of the index. As a result, the risk to capital may deter some investors from adding this product to their portfolio.

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