ONE Financial today launched a new principal guaranteed investment designed to provide investors with an alternative to both traditional GICs and non-guaranteed high income seeking investments.

The BNP Paribas Step-Over Bonds (Series 1) provide the potential for a semi-annual income stream and the ability to lock in stock market gains every six months. It is one of the first equity-linked bank deposit products in Canada designed to provide investors with a regular income stream.

The bonds, which mature on Dec. 30, 2011, provide a variable semi-annual coupon payment of up to 5% every six months (up to 10% annual income). Coupon payments are linked to the level of an index consisting of equally weighted shares of 50 of the world’s largest and most successful multinational companies initially selected from the Dow Jones Global Titans 50 Index.

“ONE Financial is excited to kick off RSP season with another unique product for investors looking for a secure way to pursue an annual income of up to 10%,” said Jeffrey O’Brien, ONE Financial’s CEO, in a news release.

The bonds are available through financial advisors until March 15 for a minimum investment of only $2,000. They are issued by BNP Paribas (Canada) and 100% principal guaranteed.

The bonds use a simple mechanism for determining the semi-annual interest rate payable to investors. If the index level (starting initially at 100, and adjusted thereafter for the average return, capped at 5%, of each of the shares in the Index) is over 100 on any semi-annual coupon valuation date, investors will receive a coupon. The percentage amount of such coupon will be equal to the index level minus 100.

If each of the shares in the Index have “stepped over” an index level of 105 on any semi-annual coupon valuation date, investors will receive a 5% coupon payment (up to 10% annual income). Because the performance of the index shares is calculated from the initial investment date (and not over each 6-month period), a 5% coupon may be paid even after a 6-month period of negative performance of the index shares.

The bonds’ historical pro-forma average annual income has been 9.0% per year for all seven and a half year periods between January 1994 and January 2004 (past performance is not indicative of future returns).

The bonds qualify as Canadian content for RRSPs, RRIFs, and DPSPs, and are also RESP-eligible.

For investors who wish to sell the investment at any time prior to maturity, ONE Financial and BNP Paribas intend to facilitate a weekly secondary market for the bonds beginning six months from the Closing Date, but reserve the right not to do so at any point in the future.