View the 100% Capital Protected High Dividend Basket ... - Coutts
View the 100% Capital Protected High Dividend Basket ... - Coutts
View the 100% Capital Protected High Dividend Basket ... - Coutts
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<strong>Coutts</strong> Structured Investments Plan<br />
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<strong>Coutts</strong> Structured Investment Plan<br />
<strong>100%</strong> <strong>Capital</strong> <strong>Protected</strong><br />
<strong>High</strong> <strong>Dividend</strong> Stock <strong>Basket</strong> Strategy =======<br />
Strategy Features<br />
abcd<br />
1
Introduction<br />
<strong>Coutts</strong> & Co. (‘<strong>Coutts</strong>’) have designed a series of structured<br />
investments linked to <strong>the</strong> latest <strong>Coutts</strong> research around <strong>the</strong><br />
‘Hunt for Yield’ <strong>the</strong>me. This four year strategy is designed to<br />
take advantage of <strong>the</strong> potential appreciation in a basket of<br />
stocks designed for this strategy and chosen for <strong>the</strong>ir<br />
attractiveness in terms of dividend, dividend policy,<br />
sustainability of earnings and fundamental strength (<strong>the</strong> ‘<strong>High</strong><br />
<strong>Dividend</strong> Stock <strong>Basket</strong>’ or ‘<strong>Basket</strong>’).<br />
We believe our selection of stocks will continue to be<br />
popular as o<strong>the</strong>r sources of yield remain thin on <strong>the</strong> ground.<br />
This continued popularity has <strong>the</strong> potential to support and<br />
drive share prices in <strong>the</strong> <strong>Basket</strong>.<br />
Please note however that any return will not include<br />
any dividends payable on <strong>the</strong> shares within <strong>the</strong> <strong>Basket</strong>.<br />
Investment Strategy<br />
=<br />
This Strategy Features Document describes a four year<br />
sterling denominated <strong>Coutts</strong> Structured Investment Plan<br />
Strategy (<strong>the</strong> ‘Strategy’). The Strategy offers a return equal to<br />
1.25 times any appreciation in <strong>the</strong> <strong>Basket</strong> up to a maximum<br />
return of 35% of your investment paid at maturity.<br />
If <strong>the</strong> <strong>Basket</strong> falls in value over <strong>the</strong> term <strong>the</strong>n, at maturity, <strong>the</strong><br />
Strategy offers <strong>100%</strong> capital protection, subject to <strong>the</strong> Issuer<br />
risk described elsewhere in this document.<br />
Please see ‘Composition of <strong>the</strong> <strong>Basket</strong>’ elsewhere in this<br />
document for details on <strong>the</strong> <strong>Basket</strong> components.<br />
How <strong>the</strong> Strategy is delivered<br />
<strong>Coutts</strong> will purchase on your behalf a warrant that tracks <strong>the</strong><br />
performance of <strong>the</strong> <strong>Basket</strong> (‘tracker warrant’) and a warrant<br />
that aims to protect you from any fall in <strong>the</strong> <strong>Basket</strong> (‘hedge<br />
warrant’) from <strong>the</strong> Issuer. A warrant is a type of investment<br />
that contains special terms in relation to <strong>the</strong> timing and<br />
amount that is repaid. Toge<strong>the</strong>r, <strong>the</strong>se two warrants<br />
comprise <strong>the</strong> Strategy. The issuer of <strong>the</strong> warrants will be The<br />
Royal Bank of Scotland plc (‘RBS plc’ or <strong>the</strong> ‘Issuer’). <strong>Coutts</strong><br />
is a member of The Royal Bank of Scotland Group. Once<br />
invested <strong>the</strong> warrants will be held in <strong>the</strong> name of Brown<br />
Bro<strong>the</strong>rs Harriman & Co, a non trading nominee company<br />
whose assets are beneficially owned by investors.<br />
Should <strong>the</strong> <strong>Basket</strong> rise in value over <strong>the</strong> term, <strong>the</strong> tracker<br />
warrant will provide <strong>100%</strong> of your initial investment plus 1.25<br />
times <strong>the</strong> appreciation of <strong>the</strong> <strong>Basket</strong> at maturity up to a<br />
maximum return of 35% of your investment (see next section<br />
for details).The tracker warrant could lose value if <strong>the</strong> <strong>Basket</strong><br />
falls over <strong>the</strong> term but, in conjunction with <strong>the</strong> hedge<br />
warrant, it will provide <strong>100%</strong> capital protection as long as <strong>the</strong><br />
Strategy is held to maturity, subject to <strong>the</strong> Issuer risk<br />
described elsewhere in this document.<br />
<strong>Coutts</strong> has categorised this Strategy as ‘Wealth Enhancement’<br />
due to its four year term. Fur<strong>the</strong>r information on <strong>the</strong> wealth<br />
categories and <strong>the</strong> risk associated with <strong>the</strong>m are detailed in<br />
<strong>the</strong> ‘Wealth Purpose Category Table’ on page 8.<br />
<strong>Coutts</strong> Structured Investments Plan<br />
<strong>Coutts</strong> has reserved a set amount of each Strategy with <strong>the</strong><br />
Issuer. The Strategy will be allocated on a first come first<br />
serve basis. If <strong>the</strong> Strategy is oversubscribed your<br />
application may not be successful and we will inform you as<br />
soon as possible.<br />
How Your Return Is Calculated<br />
The Strategy is linked to <strong>the</strong> performance of an equally<br />
weighted basket of 12 stocks selected from across <strong>the</strong><br />
globe. The performance of <strong>the</strong> <strong>Basket</strong> is equal to <strong>the</strong><br />
average return of <strong>the</strong> individual stocks comprising <strong>the</strong><br />
<strong>Basket</strong>. The return of each stock is calculated by comparing<br />
<strong>the</strong> average closing level of that stock across seven<br />
consecutive weekly dates (‘Averaging’), up to and including<br />
<strong>the</strong> Final Determination Date, with its closing level on <strong>the</strong><br />
First Fixing Date.<br />
If <strong>the</strong> performance of <strong>the</strong> <strong>Basket</strong> is positive, <strong>the</strong>n at<br />
maturity, you will receive your initial investment plus an<br />
investment return equal to 1.25 times <strong>the</strong> performance of<br />
<strong>the</strong> <strong>Basket</strong> up to a maximum return of 35%, subject to <strong>the</strong><br />
Issuer risk described later in <strong>the</strong> document.<br />
If <strong>the</strong> performance of <strong>the</strong> <strong>Basket</strong> is zero or negative, <strong>the</strong>n<br />
at maturity, you will only receive your initial investment<br />
amount, subject to <strong>the</strong> Issuer risk described later in <strong>the</strong><br />
document (see scenarios in ‘Illustration of Performance of<br />
<strong>the</strong> Strategy’ overleaf).<br />
Averaging may benefit <strong>the</strong> Strategy’s performance if <strong>the</strong><br />
<strong>Basket</strong> depreciates during <strong>the</strong> Averaging period. However,<br />
if <strong>the</strong> opposite occurs, this will constrain <strong>the</strong> Strategy’s<br />
performance when compared to a calculation method<br />
which does not use Averaging.<br />
Your return will not include <strong>the</strong> dividends you would<br />
receive if holding <strong>the</strong> equities directly.<br />
Our House <strong>View</strong><br />
<strong>Coutts</strong> forecasts that high dividend paying equities will<br />
deliver attractive returns in <strong>the</strong> current economic and<br />
investment environment. Historical data implies that higher<br />
dividend paying equities perform well in periods of lower<br />
growth and inflation. With interest rates in developed<br />
economies at record low levels, investors look for yield<br />
from o<strong>the</strong>r assets, so we would expect <strong>the</strong>m to drive up<br />
<strong>the</strong> share price of companies offering high dividends. Our<br />
conclusion is that high dividend paying shares are<br />
potentially an attractive investment in <strong>the</strong> current<br />
environment. As this Strategy does not benefit directly<br />
from dividends paid by <strong>the</strong> shares in <strong>the</strong> <strong>Basket</strong>, it is<br />
focused on companies where <strong>the</strong>re is scope for dividend<br />
payments to be increased, so providing a support to <strong>the</strong><br />
share price. Therefore <strong>the</strong> companies included have strong<br />
balance sheets and dividends which we believe are<br />
sustainable from <strong>the</strong>ir profits and cash flow.<br />
Issuer Risk<br />
The issuer of <strong>the</strong> warrants underlying this Strategy will be<br />
RBS plc. In <strong>the</strong> unlikely event that RBS plc were to default<br />
2
<strong>Coutts</strong> Structured Investments Plan<br />
or go bankrupt, you may lose some or all of your investment<br />
and return.<br />
The financial position of <strong>the</strong> Issuer may change over <strong>the</strong> life of<br />
<strong>the</strong> Strategy.<br />
Credit ratings can be a useful way to compare <strong>the</strong> credit risk<br />
associated with different product providers and related<br />
investments. Credit ratings are assigned by independent<br />
companies known as ratings agencies and reviewed regularly.<br />
RBS plc’s long-term credit rating as at 22 October 2010 was<br />
Aa3 from Moody’s with a stable outlook (its equivalent rating<br />
by Standard & Poor’s was A+, stable outlook and by Fitch was<br />
AA-, stable outlook). Moody’s, Standard & Poor’s and Fitch<br />
are independent agencies.<br />
You should note that Moody’s rate companies from Aaa<br />
(Most Secure/Best) to C (Most Risky/ Worst), while Standard<br />
& Poor’s and Fitch rate companies from AAA (Most<br />
Secure/Best) to D (Most Risky/ Worst). These credit ratings<br />
are reviewed on a regular basis and are subject to change by<br />
<strong>the</strong>se agencies. A rating outlook indicates <strong>the</strong> likely rating<br />
trend over a one to two-year period. It reflects financial or<br />
o<strong>the</strong>r trends that have not yet reached <strong>the</strong> level that would<br />
trigger rating action, but which may do so if such trends<br />
continue. A stable outlook means that <strong>the</strong> rating is not likely<br />
to change in <strong>the</strong> short term.<br />
Based on <strong>the</strong>se ratings, it is expected that <strong>the</strong> Issuer will meet<br />
its payment obligations to you at <strong>the</strong> end of <strong>the</strong> Strategy<br />
term, but this is not guaranteed.<br />
Please note that in <strong>the</strong> event of <strong>the</strong> Issuer defaulting or going<br />
bankrupt, compensation will not be available under <strong>the</strong> UK<br />
Financial Services Compensation Scheme.<br />
O<strong>the</strong>r Risks<br />
There is a risk that your return may not be as good as if you<br />
had invested in o<strong>the</strong>r types of assets, for example in a cash<br />
deposit.<br />
Any return you receive may fail to beat inflation, which will<br />
reduce <strong>the</strong> purchasing power of your investment by <strong>the</strong> time<br />
<strong>the</strong> Strategy matures.<br />
Economic, political and social factors can cause adverse<br />
market fluctuations that may affect <strong>the</strong> performance of <strong>the</strong><br />
Strategy.<br />
A change in <strong>the</strong> market conditions (as discussed under<br />
‘House <strong>View</strong>’) and/or an increase in interest rates could<br />
adversely affect <strong>the</strong> Strategy.<br />
The <strong>Basket</strong> is comprised of only 12 stocks, so <strong>the</strong> adverse<br />
performance of just one or two of <strong>the</strong>se stocks can have a<br />
significant effect on <strong>the</strong> performance of <strong>the</strong> Strategy.<br />
The <strong>Basket</strong> is comprised of shares of companies selected<br />
from only a few sectors. In particular, five of <strong>the</strong> twelve<br />
<strong>Basket</strong> components are shares of telecom companies. Any<br />
adverse market developments in one or more of <strong>the</strong>se<br />
sectors (in particular <strong>the</strong> telecoms sector) may have a<br />
significant adverse impact on <strong>the</strong> performance of <strong>the</strong> <strong>Basket</strong><br />
and consequently <strong>the</strong> Strategy.<br />
The Issuer<br />
You will be subject to, and bound by, <strong>the</strong> Issuer’s terms for<br />
each warrant that makes up <strong>the</strong> Strategy, copies of which<br />
are available from <strong>Coutts</strong>. Issuer documentation typically<br />
contains rights for <strong>the</strong> Issuer to vary <strong>the</strong> terms of <strong>the</strong><br />
warrants that make up <strong>the</strong> Strategy upon <strong>the</strong> occurrence of<br />
specified events which may operate to your disadvantage.<br />
Examples of such events are disruption or closure of <strong>the</strong><br />
relevant markets, cessation of any applicable <strong>Basket</strong><br />
constituent, settlement disruption and increased costs to<br />
<strong>the</strong> Issuer of providing <strong>the</strong> warrants.<br />
In such events, <strong>the</strong> Issuer may have <strong>the</strong> right, for example,<br />
to vary <strong>the</strong> basis of valuation of, to postpone settlement of,<br />
or to cancel <strong>the</strong> warrants. There may be a risk to your<br />
investment in <strong>the</strong>se circumstances.<br />
<strong>Coutts</strong> Fees<br />
All fees are included in <strong>the</strong> cost of <strong>the</strong> Strategy to you.<br />
<strong>Coutts</strong> will receive 1.00% of <strong>the</strong> initial investment amount.<br />
This is equivalent to 1.0101% of <strong>the</strong> consideration as<br />
detailed on <strong>the</strong> contract note.<br />
Thereafter, an annual fee of 0.30% of <strong>the</strong> initial investment<br />
amount is payable to <strong>Coutts</strong> by <strong>the</strong> Issuer for each year of<br />
<strong>the</strong> life of <strong>the</strong> Strategy. This is equivalent to 0.3030% of <strong>the</strong><br />
consideration as detailed on <strong>the</strong> contract note.<br />
This is not in addition to, and does not affect you receiving<br />
back, that part of your initial capital investment and any<br />
return you are entitled to if you hold <strong>the</strong> Strategy until<br />
maturity.<br />
The Issuer will also take fees which are built into <strong>the</strong><br />
construction of <strong>the</strong> Strategy. The amount of <strong>the</strong>se fees is<br />
not readily ascertainable, however fur<strong>the</strong>r details may be<br />
available on request.<br />
The Strategy may incur higher costs and offer reduced<br />
returns compared to a direct investment in <strong>the</strong> <strong>Basket</strong>.<br />
Liquidity<br />
The warrants that comprise <strong>the</strong> Strategy may be listed on a<br />
recognised exchange such as <strong>the</strong> London Stock Exchange.<br />
However, nei<strong>the</strong>r <strong>the</strong> Strategy nor <strong>the</strong> two constituent<br />
warrants will be traded on an exchange. As a consequence,<br />
<strong>the</strong> Strategy will not be as easily tradable as a security<br />
traded on <strong>the</strong> exchange.<br />
You will not have <strong>the</strong> right to cancel your application once<br />
it is made.<br />
The Strategy has a four year fixed term. Accordingly it may<br />
not be suitable if you need early access to your investment<br />
or regular investment returns. If you wish to redeem <strong>the</strong><br />
Strategy early, <strong>the</strong> Issuer may under normal market<br />
conditions buy back your investment in <strong>the</strong> Strategy.<br />
However, you may receive less than your initial investment<br />
amount dependent on market conditions and <strong>the</strong> tax<br />
treatment may be affected.<br />
3
<strong>Coutts</strong> Structured Investments Plan<br />
No partial sales may be made. Alternatively, at your request,<br />
<strong>Coutts</strong> may, at its absolute discretion, provide a loan using<br />
<strong>the</strong> Strategy as collateral.<br />
If death occurs within <strong>the</strong> term of <strong>the</strong> investment, and early<br />
redemption is required, <strong>the</strong> redemption value will depend<br />
upon <strong>the</strong> market value of <strong>the</strong> underlying warrants and may be<br />
less than <strong>the</strong> original amount invested and <strong>the</strong> tax treatment<br />
may be affected. Alternatively, <strong>Coutts</strong> may at its discretion<br />
agree that <strong>the</strong> investment may continue until maturity.<br />
Tax Treatment<br />
It is expected, based on current UK tax legislation that<br />
payments made on any investment under <strong>the</strong> Strategy will be<br />
subject to <strong>Capital</strong> Gains Tax for UK resident and ordinarily<br />
resident individuals. You should note that UK tax law and<br />
regulation may change in <strong>the</strong> future which could have<br />
retrospective effect.<br />
Nothing in this Strategy Features or any o<strong>the</strong>r information<br />
provided to you by <strong>Coutts</strong> or The Royal Bank of Scotland<br />
Group in connection with this investment constitutes tax<br />
advice to you. You should not rely upon any tax<br />
information provided here for your personal tax planning<br />
purposes as it may not apply to your specific circumstances.<br />
<strong>Coutts</strong> recommends that you seek your own independent<br />
tax advice.<br />
Payments under <strong>the</strong> Strategy<br />
You will receive amounts due to you within three business<br />
days of <strong>the</strong> Maturity Date unless, due to circumstances or<br />
events beyond <strong>Coutts</strong> or <strong>the</strong> Issuer’s control, <strong>the</strong><br />
calculation or payment of <strong>the</strong> capital or return as at <strong>the</strong><br />
Final Determination Date is suspended or delayed. If so<br />
<strong>Coutts</strong> will use its reasonable endeavours to obtain<br />
payment for investors of such amounts as soon as<br />
reasonably practicable after <strong>the</strong> Maturity Date.<br />
Key Dates<br />
Trade Date 6 December 2010<br />
First Fixing Date 7 December 2010<br />
Settlement Date 21 December 2010<br />
Averaging Dates 27 October 2014<br />
3 November 2014<br />
10 November 2014<br />
17 November 2014<br />
24 November 2014<br />
1 December 2014<br />
8 December 2014<br />
Final Determination Date 8 December 2014<br />
Maturity Date 22 December 2014<br />
4
Illustration of Performance of <strong>the</strong> Strategy<br />
Performance of <strong>the</strong> <strong>Basket</strong> Return Characteristics Initial<br />
Investment<br />
5 year historical and simulated performance of <strong>the</strong> <strong>Basket</strong><br />
180<br />
<strong>Coutts</strong> Structured Investments Plan<br />
Potential Total<br />
Return (gross of<br />
tax)<br />
<strong>Basket</strong> performance is +35% Initial investment amount + return equal to 1.25 times £50,000 £67,500<br />
<strong>the</strong> percentage rise of <strong>the</strong> <strong>Basket</strong> from its closing level on<br />
<strong>the</strong> First Fixing Date, subject to a maximum return of<br />
35% (giving a 35% return)<br />
<strong>Basket</strong> performance is +20% Initial investment amount + return equal to 1.25 times £50,000 £62,500<br />
<strong>the</strong> percentage rise of <strong>the</strong> <strong>Basket</strong> from its closing level on<br />
<strong>the</strong> First Fixing Date, subject to a maximum return of<br />
35% (giving a 25% return)<br />
<strong>Basket</strong> performance is zero Initial investment returned £50,000 £50,000<br />
<strong>Basket</strong> performance is -5% Initial investment returned £50,000 £50,000<br />
<strong>Basket</strong> performance is -15% Initial investment returned £50,000 £50,000<br />
170<br />
160<br />
150<br />
<strong>Basket</strong> 140<br />
performance<br />
(re-based at 130<br />
100)<br />
120<br />
110<br />
100<br />
90<br />
80<br />
17/10/2005<br />
17/12/2005<br />
17/02/2006<br />
17/04/2006<br />
17/06/2006<br />
17/08/2006<br />
17/10/2006<br />
17/12/2006<br />
17/02/2007<br />
17/04/2007<br />
17/06/2007<br />
17/08/2007<br />
17/10/2007<br />
17/12/2007<br />
17/02/2008<br />
17/04/2008<br />
17/06/2008<br />
17/08/2008<br />
17/10/2008<br />
17/12/2008<br />
17/02/2009<br />
17/04/2009<br />
17/06/2009<br />
17/08/2009<br />
17/10/2009<br />
17/12/2009<br />
17/02/2010<br />
17/04/2010<br />
17/06/2010<br />
17/08/2010<br />
Annual performance of <strong>the</strong> <strong>Basket</strong> over <strong>the</strong> last 5 years<br />
17 October 2005 to<br />
16 October 2006<br />
17 October 2006 to<br />
16 October 2007<br />
17 October 2007 to<br />
16 October 2008<br />
17 October 2008 to<br />
16 October 2009<br />
17 October 2009 to<br />
16 October 2010<br />
Annual <strong>Basket</strong><br />
Performance 23.31% 23.23% -33.95% 16.70% 8.39%<br />
Source: Bloomberg, 22 October 2010. The information in <strong>the</strong> graph and table above refers to simulated past performance and<br />
past performance of <strong>the</strong> <strong>Basket</strong>, both of which cannot be relied on as a guide to <strong>the</strong> future performance of <strong>the</strong> <strong>Basket</strong>. Past<br />
performance of <strong>the</strong> <strong>Basket</strong> is calculated based on <strong>the</strong> performance of each underlying component. Price data for shares of<br />
Philip Morris International Inc. prior to March 2008 was not available as Philip Morris International Inc. was spun off from<br />
Altria Group Inc in March 2008. The performance of Philip Morris International Inc. shares prior to this date has been<br />
simulated. To calculate this performance <strong>the</strong> percentage performance of Altria Group Inc shares for <strong>the</strong> relevant period has<br />
been calculated and such percentage performance has been assumed to apply to <strong>the</strong> Philip Morris International Inc. shares<br />
during <strong>the</strong> relevant period.<br />
5
Composition of <strong>the</strong> <strong>Basket</strong><br />
<strong>Coutts</strong> Structured Investments Plan<br />
Stock name Bloomberg<br />
Stock House <strong>View</strong><br />
Reference<br />
AT&T Inc. T UN AT&T Inc. is <strong>the</strong> largest telecom provider in <strong>the</strong> US by market capitalisation<br />
(<strong>the</strong> number of outstanding shares multiplied by <strong>the</strong> current share price)<br />
providing, through its subsidiaries and affiliates, local and long-distance<br />
phone services, wireless and data communications, Internet access and<br />
messaging, IP-based and satellite television, security services,<br />
telecommunications equipment, and directory advertising and publishing.<br />
The current market forecast (as measured by analyst data supplied to<br />
Reuters) for <strong>the</strong> dividend yield (<strong>the</strong> ratio of <strong>the</strong> dividend to <strong>the</strong> share price)<br />
is 5.9% for Dec ’10, and 6.0% for Dec ’11. The company’s financial position,<br />
in our view, should be sufficient for dividend payment in both years.<br />
British American BATS LN British American Tobacco Plc (‘BAT’) is an international tobacco group that<br />
Tobacco Plc<br />
produces, markets, distributes and sells cigarettes and o<strong>the</strong>r tobacco<br />
products and whose brands are sold in over 180 countries. The company<br />
has been offsetting <strong>the</strong> maturity of its western markets by expanding its<br />
presence in emerging economies. BAT has a strong trading record, helped<br />
by <strong>the</strong> fact that demand for tobacco products is generally unaffected by<br />
rising prices, which has supported an attractive dividend policy. This is<br />
highlighted by <strong>the</strong> fact <strong>the</strong> dividend has risen almost four-fold in <strong>the</strong> past<br />
decade. The current market forecasts for dividend yield are 4.7% for Dec<br />
’10, and 5.1% for Dec ’11. In our view <strong>the</strong> company’s financial position<br />
should be sufficient for dividend payment in both years.<br />
China Mobile Ltd 941 HK China Mobile Ltd is China’s incumbent and leading mobile operator and<br />
provides, through its subsidiaries, cellular telecommunications and related<br />
services in <strong>the</strong> People’s Republic of China and Hong Kong SAR. It has over<br />
500m subscribers reflecting superior network coverage and a good brand<br />
image and distribution network. Both rural expansion and mobile data<br />
represent strong growth opportunities. China Mobile Ltd’s current market<br />
forecasts for dividend yield are 3.7% for Dec ’10, and 3.9% for Dec ’11. In<br />
our view <strong>the</strong> company’s financial position should be supportive of dividend<br />
payment in both years.<br />
GlaxoSmithKline Plc GSK LN GlaxoSmithKline Plc (‘GSK’) is a leading global pharmaceutical company,<br />
with key market positions in respiratory, anti-virals and vaccines. Relative<br />
to its peers, GSK has less future concerns about <strong>the</strong> impact of patent<br />
expiries and competition from existing drugs. At present <strong>the</strong>re is a good<br />
pipeline of new products with some 30 compounds in phase III<br />
development / registration. The current market forecasts for dividend yield<br />
is 4.8% for Dec ’10, and 5.2% for Dec ’11. In our view <strong>the</strong> company’s<br />
financial position should be sufficient for dividend payment in both years.<br />
Koninklijke KPN NV KPN NA Koninklijke KPN NV is <strong>the</strong> leading provider of telecommunication services in<br />
<strong>the</strong> Ne<strong>the</strong>rlands, including local and long-distance, international and mobile<br />
telecoms services, plus voice-mail, faxing and ISDN internet lines. Cost<br />
cutting should protect <strong>the</strong> bottom-line and cash flows, and as such <strong>the</strong><br />
company’s financial position should be sufficient for dividend payment in<br />
both years. Current market forecasts for dividend yield are 6.9% for Dec<br />
’10, and 7.4% for Dec ’11.<br />
Pfizer Inc. PFE UN Pfizer Inc. is a research-based, global pharmaceutical company that<br />
discovers, develops, manufactures and markets medicines for humans and<br />
animals. Pfizer Inc. halved its dividend in 2009 in-line with expectations of<br />
lower levels of earnings and cash flow during a period of patent expiry for a<br />
number of its key drugs. Despite this cut, Pfizer Inc.'s current dividend<br />
yield forecasts remain attractive at 4.1% for Dec ’10, and 4.4% for Dec ’11.<br />
In our view <strong>the</strong> company’s financial position should be supportive of<br />
6<br />
Philip Morris<br />
International Inc.<br />
PM UN<br />
dividend payment in both years.<br />
Philip Morris International Inc. (‘PM’), through its subsidiaries, affiliates and<br />
<strong>the</strong>ir licensees, produces, sells, distributes and markets a wide range of<br />
branded cigarettes and tobacco products. PM owns Marlboro, <strong>the</strong> no.1<br />
brand outside of <strong>the</strong> US and 6 o<strong>the</strong>r top-15 (non-Chinese) cigarette brands.
<strong>Coutts</strong> Structured Investments Plan<br />
PM sells entirely into non-US cigarette markets, successfully focussing on<br />
pursuing higher prices ra<strong>the</strong>r than volumes. Owing to its strong balance<br />
sheet, PM is able to release value to shareholders via large share buybacks<br />
as well as solid dividend growth. The current market forecasts for dividend<br />
yield are 4.2% for Dec ’10, and 4.7% for Dec ’11. In our view <strong>the</strong> company’s<br />
financial position should be sufficient for dividend payment in both years.<br />
Tate & Lyle Plc TATE LN Tate & Lyle Plc is a global provider of specialty and bulk food ingredients<br />
and solutions. What this means in practice is that in bulk commodities it is a<br />
global processer of corn (maize) into its elemental components of water,<br />
starch, oil, glucose, and husk, while in specialty ingredients it produces a<br />
range of value adding products such as sucralose and complex starches.<br />
We believe that whilst bulk soft commodity markets may be nebulous and<br />
volatile over shorter time frames, <strong>the</strong> company’s financial position, in our<br />
view, should be sufficient for dividend payment in both years. Current<br />
market forecasts for dividend yield are 4.4% for Mar ’11, and 4.6% for Mar<br />
’12.<br />
Total SA FP FP Total SA is <strong>the</strong> largest integrated oil & gas company in continental Europe.<br />
The company is <strong>the</strong> 2 nd largest Liquefied Natural Gas (LNG) producer<br />
globally and should benefit above average from growing gas demand in<br />
emerging markets. Total SA has a well diversified upstream portfolio<br />
(including oil and gas exploration, development and production, and LNG)<br />
and has strong positions in major deepwater offshore growth areas in West<br />
Africa and South East Asia. Total SA’s return on capital invested is sector<br />
leading and coupled with <strong>the</strong> company’s financial position, in our view,<br />
should support dividend payment in both years. Current market forecasts<br />
for dividend yield are 5.9% for Dec ’10, and 6.1% for Dec ’11.<br />
Verizon<br />
VZ UN<br />
Communications Inc.<br />
Verizon Communications Inc. provides fixed line, wireless and data<br />
telecommunications services. The Board reviews dividend policy annually<br />
and has stated it is committed to returning cash while also continuing to<br />
invest in <strong>the</strong> long-term growth of <strong>the</strong> business. Unusually, <strong>the</strong> company<br />
establishes dividend policy during <strong>the</strong> quarter ending in September which in<br />
2010 marked <strong>the</strong> 4 th consecutive annual dividend increase commitment<br />
made by <strong>the</strong> company for that quarter and <strong>the</strong> next three. The current<br />
market forecasts for dividend yield <strong>the</strong>refore includes this commitment and<br />
stands at 5.9% for Dec ’10, and 6.0% for Dec ’11. In our view <strong>the</strong> company’s<br />
financial position should be sufficient for dividend payment in both years.<br />
Vivendi SA VIV FP Vivendi SA is a major player in both <strong>the</strong> French media and telecoms<br />
markets. The company, through its subsidiaries, provides digital and pay<br />
television services, sells music compact discs, develops and distributes<br />
interactive entertainment and operates mobile and fixed-line<br />
telecommunications. The group has an attractive portfolio of income<br />
generators and growth businesses. The current market forecasts for<br />
dividend yield are 6.8% for Dec ’10, and 6.8% for Dec ’11. In our view <strong>the</strong><br />
company’s financial position should be sufficient for dividend payment in<br />
both years.<br />
Vodafone Group Plc VOD LN Vodafone Group Plc is one of <strong>the</strong> largest global telecommunication services<br />
companies with 347m customers. Principal geographies are Europe, Asia,<br />
Middle East, Asia Pacific, and through a primary joint venture, <strong>the</strong> US.<br />
Vodafone Group Plc’s subsidiaries already contribute significantly to <strong>the</strong><br />
shareholder’s return although this is not <strong>the</strong> case for its primary joint<br />
ventures. However we expect <strong>the</strong> primary joint ventures to start<br />
contributing soon and so we believe this provides <strong>the</strong> opportunity for a<br />
decent medium term capital and income return for shareholders. The<br />
current market forecasts for dividend yield are 5.4% for Mar ’11, and 5.7%<br />
for Mar ’12. In our view <strong>the</strong> company’s financial position should be sufficient<br />
for dividend payment in both years.<br />
Please note: Market forecasts for dividends expected to be paid by <strong>the</strong> <strong>Basket</strong> components are currently only available for<br />
<strong>the</strong> next two years. There is no assurance that dividends will be paid as forecast above or o<strong>the</strong>rwise during <strong>the</strong> remainder of<br />
<strong>the</strong> term of <strong>the</strong> Strategy in respect of <strong>the</strong> <strong>Basket</strong> components.<br />
7
8<br />
<strong>Coutts</strong> Structured Investments Plan
<strong>Coutts</strong> Structured Investments Plan<br />
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You should consider carefully whe<strong>the</strong>r an investment in this Strategy meet your specific investment objectives,<br />
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Any expressions of opinion constitute our judgment at <strong>the</strong> date shown and are subject to change. Any<br />
information is believed to be correct but cannot be guaranteed. <strong>Coutts</strong> may subsequently launch strategies<br />
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and <strong>the</strong> results are being made available to you on this understanding. To <strong>the</strong> extent permitted by law and<br />
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(01/11/10)<br />
9