The bond is linked to the performance of three stockmarket indices the Dow Jones Eurostoxx 50, FTSE 100 and Nikkei 225 indices. Investors will get a full capital return regardless of the performance of the indices but income will depend on how they perform.
If each index is at or above its initial level at the end of each year, investors will get 7 per cent income for that year. If the index falls within each period, no income is payable and it will be rolled over to the following year.,
For example, if the index falls in year one, no income is payable but the potential income payable in year two will be 14 per cent. Again, if the index falls in that year, the income will be rolled over into the third year so 21 per cent could be paid and so on.
To get the maximum of 7 per cent a year, there must be no falls in any of the indices and investors will be taking a risk on the likelihood of this happening. A good feature is that the rollover aspect means investors still have the chance to recoup any income payments that they miss out on, but as the same criteria is use across the indices every year, investors are still up against the same odds.
Any fall in the indices will wipe out eligibility for income so there is a risk that investors could end up with just their original capital.