Wesleyan's capital & income bond issue is a combination of a
guaranteed equity bond with a high-interest account which gives
investors a choice of a five or seven year term. Up to 50 per cent can
go into the high-interest account, while the remainder goes into the
guaranteed equity bnnd.
The guaranteed equity bond element, which is used to provide
growth, is linked o four stockmarket indices - the FTSE 100, Nikkei
225, Swiss Market Index and the S&P 500. Investors will receive 70
per cent of any growth in these indices plus the original capital
regardless of stockmarket performance.
To calculate the returns, the closing value of each index is recorded
at the start of the term for the five-year bond and an average is
produced, which will be compared with an average taken during the
last 12 months of the term. The seven-year version differs slightly in
that averaging takes place during the first 12 months and the last 12
months of the term. Investors can make withdrawals if they need to,
but this will incur a charge and investors will also forfeit the full capital
The high-interest account element provides a monthly income and
the amount differs according to the length of term that is chosen. A
five-year term will produce 5.25 per cent gross a month while a
seven-year term will provide 5.5 per cent gross a month. No
withdrawals can be made from this element during the term.
Bristol & West manages this product and the company is also
promoting a similar product. The guaranteed equity bond element of
the Bristol & West product is identical to the Wesleyan product, but it
has an additional feature where 60 per cent growth can be locked in,
which some investors may regard as an extra safeguard. The
high-interest account element of this product is fixed at 8 per cent for
one year, and some investors may prefer this to a seven-year term
during which they cannot access their money.