Fifth issue of Guaranteed Equity Bonds launched by NS&I

The decision to offer Guaranteed Equity Bonds (GEBs) was a landmark for NS&I because it was the first time it had ever offered an equity-linked investment. NS&I's GEBs give investors the opportunity to share in potential stock market growth with the Treasury guarantee that their capital is 100% secure.

Issue 5 is on sale for a limited period from 6 May to 16 June 2003, although it may close earlier if fully subscribed. Due to heavy demand, it is launched just under a month after Issue 4 closed which, on its last day of sale alone, sold £8 million. Currently, over 9,000 people are registered to receive advance information on Issue 5.

Issue 5 of the GEB offers investors the opportunity to gain from any growth in the FTSE 100 index over the five year term, up to a maximum of 65% gross, with zero risk to their capital.

As well as picking up an application from Post Office Branches or downloading one online at www.nsandi.com, investors can apply (using a debit card) for the Bond twenty four hours a day, seven days a week by calling 0500 500 000.

Why investors purchased NS&I Guaranteed Equity Bonds?

In just over a year, NS&I has become an established major provider for these investments and customers say the main reasons they invest in the NS&I Guaranteed Equity Bond are:

• That they are guaranteed to get back all of the money invested as it is 100% secure - backed by HM Treasury
• They are existing NS&I customers so already value NS&I products
• The NS&I GEB is a low risk way to benefit from potential stock market growth.

Some customer comments following investment in previous Issues:

"The unusual combination of the lack of risk and the excitement of the potentially good return attracted me to this investment." (Mrs L Stooksbury, Winchester, Age 37)

"I chose this investment because the Bond will match the growth in the FTSE 100 index up to a maximum of 65%, and I will not lose any of my capital." (Mr P Teague, Cheltenham, aged 54)

"I invested in the Bond because I was looking for a worthwhile and secure investment for my retirement with the chance of a better return than just leaving it in a bank or building society account. I have recommended it to my friends." (Mrs J Loxton from Barnsley, aged 56)

Gill Cattanach, Commercial Director, National Savings and Investments, said:

"With low interest rates and uncertain stock market conditions, investors are seeking the opportunity to earn a better return over the longer-term without risking a penny. "Our Guaranteed Equity Bonds have proved successful over the last year and are now an established part of our product range. As with all our products, customer's money is 100% secure - backed by the Treasury."

Notes to Editors

1. Issue 5 has a maximum potential return or 'cap' of 65% gross (i.e. before tax) so investors will receive all of the growth in the FTSE 100 index over the five year term up to a maximum of 65%. Other types of Guaranteed Equity Bonds on the market offer a 'participation' rate. Reduced participation bonds have no maximum limit on returns but only pay a proportion of the growth in the FTSE 100 index. (Product Comparison chart - Appendix 3) For example, if the FTSE 100 index were to grow by 65%, the NS&I Guaranteed Equity Bond would give a return of 65% gross, (i.e. 100% of 65%) whereas a Bond with a reduced participation of, for example, 70% would only give a return of 45.5% gross (i.e. 70% of 65% - See Appendix 1). For all growth levels in the FTSE 100 index up to 92%, the National Savings and Investments Guaranteed Equity Bond would pay a higher return than a Bond with a 70% participation rate. Appendix 2 illustrates the returns on both types of Bond, for a range of FTSE 100 index growth levels.
2. Even if the FTSE 100 index were to fall over the five-year term, capital invested in the Issue 5 Guaranteed Equity Bond will be secure and returned to investors in full.
3. In summary, the NS&I Guaranteed Equity Bond Issue 5 offers:
   - an attractive potential return linked to the UK's top quoted 100 companies, through the FTSE 100 index
   - a guarantee to return the original investment in full - regardless of stock market performance - backed by HM Treasury
   - a maximum return of 65% gross over five years
   - 3.25% pa gross interest during the offer period (paid at maturity)
   - all returns paid gross at maturity, liable to income tax at the rates applicable to savings
   - the opportunity to invest any amount from £2,000 up to £1 million (or £2 million for joint investments)
   - no fees or charges
   - scope for individuals and trustees to invest
   - the start and end FTSE 100 Index levels allow for five days initial averaging and six months final daily averaging
   - a launch date of 6 May, with an offer period that closes on 16 June (earlier if fully subscribed). Investment starts on 17 June 2003 and the Bond matures on 17 June 2008
4. National Savings and Investments is one of the largest savings organisations in the UK, offering a range of savings and investments products (to 30 million customers). All products offer 100% security, because HM Treasury backs them.