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Composition of the Basket Coutts Structured Investments Plan Stock name Bloomberg Stock House View Reference AT&T Inc. T UN AT&T Inc. is the largest telecom provider in the US by market capitalisation (the number of outstanding shares multiplied by the current share price) providing, through its subsidiaries and affiliates, local and long-distance phone services, wireless and data communications, Internet access and messaging, IP-based and satellite television, security services, telecommunications equipment, and directory advertising and publishing. The current market forecast (as measured by analyst data supplied to Reuters) for the dividend yield (the ratio of the dividend to the share price) is 5.9% for Dec ’10, and 6.0% for Dec ’11. The company’s financial position, in our view, should be sufficient for dividend payment in both years. British American BATS LN British American Tobacco Plc (‘BAT’) is an international tobacco group that Tobacco Plc produces, markets, distributes and sells cigarettes and other tobacco products and whose brands are sold in over 180 countries. The company has been offsetting the maturity of its western markets by expanding its presence in emerging economies. BAT has a strong trading record, helped by the fact that demand for tobacco products is generally unaffected by rising prices, which has supported an attractive dividend policy. This is highlighted by the fact the dividend has risen almost four-fold in the past decade. The current market forecasts for dividend yield are 4.7% for Dec ’10, and 5.1% for Dec ’11. In our view the company’s financial position should be sufficient for dividend payment in both years. China Mobile Ltd 941 HK China Mobile Ltd is China’s incumbent and leading mobile operator and provides, through its subsidiaries, cellular telecommunications and related services in the People’s Republic of China and Hong Kong SAR. It has over 500m subscribers reflecting superior network coverage and a good brand image and distribution network. Both rural expansion and mobile data represent strong growth opportunities. China Mobile Ltd’s current market forecasts for dividend yield are 3.7% for Dec ’10, and 3.9% for Dec ’11. In our view the company’s financial position should be supportive of dividend payment in both years. GlaxoSmithKline Plc GSK LN GlaxoSmithKline Plc (‘GSK’) is a leading global pharmaceutical company, with key market positions in respiratory, anti-virals and vaccines. Relative to its peers, GSK has less future concerns about the impact of patent expiries and competition from existing drugs. At present there is a good pipeline of new products with some 30 compounds in phase III development / registration. The current market forecasts for dividend yield is 4.8% for Dec ’10, and 5.2% for Dec ’11. In our view the company’s financial position should be sufficient for dividend payment in both years. Koninklijke KPN NV KPN NA Koninklijke KPN NV is the leading provider of telecommunication services in the Netherlands, including local and long-distance, international and mobile telecoms services, plus voice-mail, faxing and ISDN internet lines. Cost cutting should protect the bottom-line and cash flows, and as such the company’s financial position should be sufficient for dividend payment in both years. Current market forecasts for dividend yield are 6.9% for Dec ’10, and 7.4% for Dec ’11. Pfizer Inc. PFE UN Pfizer Inc. is a research-based, global pharmaceutical company that discovers, develops, manufactures and markets medicines for humans and animals. Pfizer Inc. halved its dividend in 2009 in-line with expectations of lower levels of earnings and cash flow during a period of patent expiry for a number of its key drugs. Despite this cut, Pfizer Inc.'s current dividend yield forecasts remain attractive at 4.1% for Dec ’10, and 4.4% for Dec ’11. In our view the company’s financial position should be supportive of 6 Philip Morris International Inc. PM UN dividend payment in both years. Philip Morris International Inc. (‘PM’), through its subsidiaries, affiliates and their licensees, produces, sells, distributes and markets a wide range of branded cigarettes and tobacco products. PM owns Marlboro, the no.1 brand outside of the US and 6 other top-15 (non-Chinese) cigarette brands.
Coutts Structured Investments Plan PM sells entirely into non-US cigarette markets, successfully focussing on pursuing higher prices rather than volumes. Owing to its strong balance sheet, PM is able to release value to shareholders via large share buybacks as well as solid dividend growth. The current market forecasts for dividend yield are 4.2% for Dec ’10, and 4.7% for Dec ’11. In our view the company’s financial position should be sufficient for dividend payment in both years. Tate & Lyle Plc TATE LN Tate & Lyle Plc is a global provider of specialty and bulk food ingredients and solutions. What this means in practice is that in bulk commodities it is a global processer of corn (maize) into its elemental components of water, starch, oil, glucose, and husk, while in specialty ingredients it produces a range of value adding products such as sucralose and complex starches. We believe that whilst bulk soft commodity markets may be nebulous and volatile over shorter time frames, the company’s financial position, in our view, should be sufficient for dividend payment in both years. Current market forecasts for dividend yield are 4.4% for Mar ’11, and 4.6% for Mar ’12. Total SA FP FP Total SA is the largest integrated oil & gas company in continental Europe. The company is the 2 nd largest Liquefied Natural Gas (LNG) producer globally and should benefit above average from growing gas demand in emerging markets. Total SA has a well diversified upstream portfolio (including oil and gas exploration, development and production, and LNG) and has strong positions in major deepwater offshore growth areas in West Africa and South East Asia. Total SA’s return on capital invested is sector leading and coupled with the company’s financial position, in our view, should support dividend payment in both years. Current market forecasts for dividend yield are 5.9% for Dec ’10, and 6.1% for Dec ’11. Verizon VZ UN Communications Inc. Verizon Communications Inc. provides fixed line, wireless and data telecommunications services. The Board reviews dividend policy annually and has stated it is committed to returning cash while also continuing to invest in the long-term growth of the business. Unusually, the company establishes dividend policy during the quarter ending in September which in 2010 marked the 4 th consecutive annual dividend increase commitment made by the company for that quarter and the next three. The current market forecasts for dividend yield therefore includes this commitment and stands at 5.9% for Dec ’10, and 6.0% for Dec ’11. In our view the company’s financial position should be sufficient for dividend payment in both years. Vivendi SA VIV FP Vivendi SA is a major player in both the French media and telecoms markets. The company, through its subsidiaries, provides digital and pay television services, sells music compact discs, develops and distributes interactive entertainment and operates mobile and fixed-line telecommunications. The group has an attractive portfolio of income generators and growth businesses. The current market forecasts for dividend yield are 6.8% for Dec ’10, and 6.8% for Dec ’11. In our view the company’s financial position should be sufficient for dividend payment in both years. Vodafone Group Plc VOD LN Vodafone Group Plc is one of the largest global telecommunication services companies with 347m customers. Principal geographies are Europe, Asia, Middle East, Asia Pacific, and through a primary joint venture, the US. Vodafone Group Plc’s subsidiaries already contribute significantly to the shareholder’s return although this is not the case for its primary joint ventures. However we expect the primary joint ventures to start contributing soon and so we believe this provides the opportunity for a decent medium term capital and income return for shareholders. The current market forecasts for dividend yield are 5.4% for Mar ’11, and 5.7% for Mar ’12. In our view the company’s financial position should be sufficient for dividend payment in both years. Please note: Market forecasts for dividends expected to be paid by the Basket components are currently only available for the next two years. There is no assurance that dividends will be paid as forecast above or otherwise during the remainder of the term of the Strategy in respect of the Basket components. 7
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