United Kingdom Index ILB - Calculation Pre-2005 Method

This section describes the ILB calculation methodology for United Kingdom Pre 2005 (UK DMO refers to these securities as Treasury Stock). 

For United Kingdom Pre 2005 (UK DMO refers to these securities as Treasury Stock):

1. There is an 8 month lag in the index
2. There is no daily iteration of the CPI and only one index for the period
3. There is no inflation protection for principal for these bonds
4. Depending on the issue, there is a 2, 4, or 6 decimal precision used for the inflation index ratio
   • Gilts issued prior to March 19, 1982 were issued with a 2 decimal precision for the inflation index ratio
   • Gilts issued between March 19, 1982 and July 10, 2002 use a 4 decimal precision for the inflation index ratio
   • Gilts issued on or after July 10, 2002 have a six decimal precision for the inflation index bonds
5. UK Treasury Stock Inflation Linked Bonds trade using the nominal, and not the inflation-adjusted principal. Note Eagle Accounting requires that all inflation linked bonds trades be entered with cleaninflation adjusted prices (real).
6. UK Inflation Linked Bonds use the Retail Price Index instead of the Consumer Price Index.
7. Bonds can trade ex-interest.

Cash Flow Calculation

Normal Length Coupon Period

                                                  C           RPID
Dividend per 100 Pounds = ------------ x -----------
                                                  2            RPIB

C = Annual Real Coupon Rate

RPID = The RPI that fixes the next dividend payment for the gilt (that is, the RPI scheduled to be published seven months prior to the month of the next coupon payment and relating to the month before that prior month): For example, if the next dividend payment on the gilt occurs in November, the RPI that fixes its value is the RPI for March of that year.

RPIB = The Base RPI for the gilt (that is, The RPI scheduled to be published seven months prior to the month of issue of the gilt and relating to the month before that prior month): For example, if the gilt is issued in November, its base RPI is the RPI for March of that year.

Short Coupon Period

                                              F       C      RPID
Coupon per 100 Pounds = ----- x ------ x -------
                                             D        2      RPIB

C = Annual Real Coupon Rate

RPID = The RPI that fixes the next dividend payment for the gilt (that is, the RPI scheduled to be published seven months prior to the month of the next coupon payment and relating to the month before that prior month): For example, if the next dividend payment on the gilt occurs in November, the RPI that fixes its value is the RPI for March of that year.

RPIB = The Base RPI for the gilt (that is, the RPI scheduled to be published seven months prior to the month of issue of the gilt and relating to the month before that prior month): For example, if the gilt is issued in November, its base RPI is the RPI for March of that year.

F = the number of days from the issue date to the next (short) coupon date

D = the numbers of day in a full quasi coupon period in which the settlement date occurs

Long Coupon Period

                                              F1             C        RPID
Coupon per 100 pounds = (------ + 1) x ----- x ----------
                                             D1              2        RPIB

C = Annual Real Coupon Rate

RPID = The RPI that fixes the next dividend payment for the gilt (that is, the RPI scheduled to be published seven months prior to the month of the next coupon payment and relating to the month before that prior month): For example, if the next dividend payment on the gilt occurs in November, the RPI that fixes its value is the RPI for March of that year.

RPIB = The Base RPI for the gilt (that is, The RPI scheduled to be published seven months prior to the month of issue of the gilt and relating to the month before that prior month): For example, if the gilt is issued in November, its base RPI is the RPI for March of that year.

F1 = the number of days from the issue date to the next quasi coupon date

D1 = the numbers of day in a full quasi coupon period in which the issue date occurs.

Maturity Payment Formula

                                                                                         RPIR
Redemption Payment per 100 Nominal Pound = 100 x -----------
                                                                                        RPIB

RPIR = The RPI that fixes the redemption payment for the gilt (that is, the RPI scheduled to be published seven months prior to the month of the redemption payment and relating to the month before that prior month): For example, if the next dividend payment on the gilt occurs in November, the RPI that fixes its value is the RPI for March of that year.

RPIB = The Base RPI for the gilt (that is, The RPI scheduled to be published seven months prior to the month of issue of the gilt and relating to the month before that prior month): For example, if the gilt is issued in November, its base RPI is the RPI for March of that year.