Standard Bank offshore has created a guaranteed equity bond that
locks in 25 per cent growth if the FTSE 100 index rises by 25 per cent
at any point during the five-year term.
Equity growth deposit is available to investors with at least the
£10,000 minimum and it returns investors' original capital regardless
of how the index performs. In addition to the possibility of locked-in
growth, investors get 75 per cent of the remaining growth. For
example, if the FTSE 100 index rises by 45 per cent, investors get 25
per cent growth then 75 per cent of the remaining 25 per cent - 18.75
per cent. This would produce a total return of the original capital plus
43.75 per cent growth.
To calculate the returns, the closing level of the index is taken on
February 25, 2004 and this is compared with the quarterly average
over the last 12 months of the term.
The lock-in feature on this product may be of interest to some
investors as once it applies, it cannot be taken away even if the index
subsequently nosedives. However, the fact that investors get only 75
per cent of the remaining growth, is not such a good aspect, since
the remaining 25 per cent growth is not passed on to investors. This
is the price they pay for the lock-in feature.
Manor Park has an offshore capital-protected product that is also
linked to the FTSE 100 index for five years, but it is structured as an
investment trust. The Manor Park fund enables investors to choose
the level of capital protection they want, so the higher the capital
protection the lower the return.
Protecting 100 per cent of capital with Manor Park will provide 110
growth in the index. For example, if the index rises by 45 per cent,
investors will get their capital back plus 49.5 per cent growth - higher
than the returns under Standard Bank Offshore.