Skipton Building Society has brought out another tranche of its five-year guaranteed growth bond that is linked to the FTSE 100, S&P 500 and Eurostoxx 50 indices.
The bond guarantees the return of the original capital, plus a minimum return of 22 per cent regardless of what happens to the indices. The maximum potential growth is 50 per cent and investments made before April 22, 2002 will receive interest of 4.25 per cent a year until May 7, 2002.
To calculate the final return, the level of each index will be recorded at the start of the term and again each year during the term. If all three indices have increased compared to the previous year, investors will get a return of 8 per cent. If this happens each year, this gives a return of 40 per cent, then a 10 per cent bonus is added to bring the final return up to 50 per cent.
If all three indices do not rise during the term, or they only increase once or twice, investors will only get the minimum of 22 per cent growth plus their original capital. They will get growth of 24 per cent if the indices rise three times during the term and 32 per cent where the indices rise four times.
The guaranteed minimum return above the original capital may make this product appealing to cautious investors looking for growth, who would rather diversify across global stockmarkets than rely on the performance of just one region. However, investors get the same minimum return if all indices rise twice during the term as they would get if none rise, which could be viewed as a drawback.