View the 100% Capital Protected High Dividend Basket ... - Coutts

Introduction
Coutts & Co. (‘Coutts’) have designed a series of structured
investments linked to the latest Coutts research around the
‘Hunt for Yield’ theme. This four year strategy is designed to
take advantage of the potential appreciation in a basket of
stocks designed for this strategy and chosen for their
attractiveness in terms of dividend, dividend policy,
sustainability of earnings and fundamental strength (the ‘High
Dividend Stock Basket’ or ‘Basket’).
We believe our selection of stocks will continue to be
popular as other sources of yield remain thin on the ground.
This continued popularity has the potential to support and
drive share prices in the Basket.
Please note however that any return will not include
any dividends payable on the shares within the Basket.
Investment Strategy
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This Strategy Features Document describes a four year
sterling denominated Coutts Structured Investment Plan
Strategy (the ‘Strategy’). The Strategy offers a return equal to
1.25 times any appreciation in the Basket up to a maximum
return of 35% of your investment paid at maturity.
If the Basket falls in value over the term then, at maturity, the
Strategy offers 100% capital protection, subject to the Issuer
risk described elsewhere in this document.
Please see ‘Composition of the Basket’ elsewhere in this
document for details on the Basket components.
How the Strategy is delivered
Coutts will purchase on your behalf a warrant that tracks the
performance of the Basket (‘tracker warrant’) and a warrant
that aims to protect you from any fall in the Basket (‘hedge
warrant’) from the Issuer. A warrant is a type of investment
that contains special terms in relation to the timing and
amount that is repaid. Together, these two warrants
comprise the Strategy. The issuer of the warrants will be The
Royal Bank of Scotland plc (‘RBS plc’ or the ‘Issuer’). Coutts
is a member of The Royal Bank of Scotland Group. Once
invested the warrants will be held in the name of Brown
Brothers Harriman & Co, a non trading nominee company
whose assets are beneficially owned by investors.
Should the Basket rise in value over the term, the tracker
warrant will provide 100% of your initial investment plus 1.25
times the appreciation of the Basket at maturity up to a
maximum return of 35% of your investment (see next section
for details).The tracker warrant could lose value if the Basket
falls over the term but, in conjunction with the hedge
warrant, it will provide 100% capital protection as long as the
Strategy is held to maturity, subject to the Issuer risk
described elsewhere in this document.
Coutts has categorised this Strategy as ‘Wealth Enhancement’
due to its four year term. Further information on the wealth
categories and the risk associated with them are detailed in
the ‘Wealth Purpose Category Table’ on page 8.
Coutts Structured Investments Plan
Coutts has reserved a set amount of each Strategy with the
Issuer. The Strategy will be allocated on a first come first
serve basis. If the Strategy is oversubscribed your
application may not be successful and we will inform you as
soon as possible.
How Your Return Is Calculated
The Strategy is linked to the performance of an equally
weighted basket of 12 stocks selected from across the
globe. The performance of the Basket is equal to the
average return of the individual stocks comprising the
Basket. The return of each stock is calculated by comparing
the average closing level of that stock across seven
consecutive weekly dates (‘Averaging’), up to and including
the Final Determination Date, with its closing level on the
First Fixing Date.
If the performance of the Basket is positive, then at
maturity, you will receive your initial investment plus an
investment return equal to 1.25 times the performance of
the Basket up to a maximum return of 35%, subject to the
Issuer risk described later in the document.
If the performance of the Basket is zero or negative, then
at maturity, you will only receive your initial investment
amount, subject to the Issuer risk described later in the
document (see scenarios in ‘Illustration of Performance of
the Strategy’ overleaf).
Averaging may benefit the Strategy’s performance if the
Basket depreciates during the Averaging period. However,
if the opposite occurs, this will constrain the Strategy’s
performance when compared to a calculation method
which does not use Averaging.
Your return will not include the dividends you would
receive if holding the equities directly.
Our House View
Coutts forecasts that high dividend paying equities will
deliver attractive returns in the current economic and
investment environment. Historical data implies that higher
dividend paying equities perform well in periods of lower
growth and inflation. With interest rates in developed
economies at record low levels, investors look for yield
from other assets, so we would expect them to drive up
the share price of companies offering high dividends. Our
conclusion is that high dividend paying shares are
potentially an attractive investment in the current
environment. As this Strategy does not benefit directly
from dividends paid by the shares in the Basket, it is
focused on companies where there is scope for dividend
payments to be increased, so providing a support to the
share price. Therefore the companies included have strong
balance sheets and dividends which we believe are
sustainable from their profits and cash flow.
Issuer Risk
The issuer of the warrants underlying this Strategy will be
RBS plc. In the unlikely event that RBS plc were to default
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