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In 1983 with an election looming the then Conservative government issued an index-linked bond (the 2% 1999) with an embedded option allowing the holder to convert the bond into a nominal bond (10.25% 1999) at any one of three future dates. This is the first and only time a convertible index-linked gilt was issued.
The Conservatives were successful in purusing their policy of taming inflation and all the options were exercised. It could be argued that the optionality was sold very cheaply, however it should be noted that this bond was issed during a period when the market was concerned about the impact of a Labour party victory at the upcoming elections. Had Labour been victorious at the polls, and pursued different (more inflationary policies), then the options may well have been worthless and not been exercised.
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