Scottish Life International has introduced an offshore guaranteed equity bond — select income and growth bond 3 — which is linked to the FTSE 100, S&P 500 and Eurostoxx 50 indices for three years and two months.
The opportunity option offers a choice between annual income of 10 per cent, quarterly income of 2.4 per cent and 32 per cent growth. Investors get their capital returned provided none of the stockmarkets fall by more than 30 per cent between October 28, 2002 and November 23, 2005. Even if this condition is breached, investors will get a full capital return if all three indices recover to their initial levels by November 24, 2005 and do not fall below this by December 21, 2005.
The cautious option offers lower returns than the opportunity option, but has less stringent conditions attached to the return of capital. Investors get annual income of 8 per cent, quarterly income of 1.9 per cent or growth of 25.5 per cent. Capital is returned provided the three stocksmarkets do not fall by more than 30 per cent. Even if they do, investors get their capital returned if the stockmarkets recover to at least 85 per cent of their initial levels by December 21, 2005.
Where none of these conditions are met, both options result in capital loss. Income investors lose between 1 per cent and 2 per cent for every 1 per cent fall in the indices. Growth investors lose between 1 per cent and 2.066 per cent for every 1 per cent fall in the indices.
This product offers a variety of options, but it is complicated and there is a risk of capital reduction even where investors choose the cautious option.
