Walker Crips Global Equity Income Plan - PLAN CLOSED

We have worked in conjunction with Walker Crips to offer clients a structured product opportunity linked to five leading global companies; BMW, BP, Johnson & Johnson, Microsoft and Roche. The Global Equity Income Plan offers an attractive 10% per annum income stream.

Plan summary

Global equity opportunities

Equity markets are becoming increasingly internationalized. A report by Citigroup in March 2011 found that nearly 70% of earnings in the FTSE 100 were generated from outside the UK. Companies are increasingly targeting overseas earnings as the growth rates in many emerging market economies exceed that of the developed world. The Walker Crips Global Equity Income Plan aims to benefit from this theme. The plan is linked to five global businesses; car manufacturer BMW; oil and gas business BP; consumer goods and pharmaceutical company Johnson & Johnson; technology company Microsoft, and the Swiss pharmaceutical company Roche. Each company has a substantial global reach with diversified product offerings. Further information on each of the companies is included in the plan brochure.

Our rationale

The benefit of the plan is that it does not require substantial growth for the attractive returns to be paid. In the current environment of austerity and uncertainty the defensive nature of the plan makes for attractive opportunities. Our continuing strategy for structured products is to offer plans on a regular basis and for clients to invest modest amounts sequentially to diversify the underlying asset, counterparty risk, and market timing.

Walker Crips Global Equity Income Plan

This six-year plan is linked to the share prices of BMW, BP, Johnson & Johnson, Microsoft and Roche. It will pay income of 10% per annum, paid on a six-monthly basis (5% will be paid every six months), which will be distributed irrespective of the performance of each of the share prices. The full return of the initial capital is dependent on the performance of each of the five share prices at maturity compared with their initial level. If any of the share prices have fallen by more than 50% at maturity compared with the initial level, initial capital will be reduced on a 1% for 1% basis. For example, if Microsoft is the worst-performing share and has fallen by 60% at maturity, compared with its initial level, the initial capital will be returned minus 60%. However, income of 5% will have been paid every six months over the six-year term, meaning a return of 60% has been received in the meantime.

Capital protection

Capital protection is dependent on Citigroup fulfilling its obligations as well as on the investment being held until maturity. Initial capital is used to purchase securities in Citigroup which has similar characteristics to investing in a corporate bond. In the unlikely event of default, investors will be creditors of Citigroup and it is unlikely to qualify for cover in relation to the Financial Services Compensation Scheme (FSCS). However, there are circumstances in which you could apply, for example if parties were found to be in breach of FSA rules.

When Walker Crips receives your money it will be held as a deposit by HSBC (earning 0.1% gross per annum). Therefore, during the period up to the investment start date, in the unlikely event of HSBC’s insolvency, claims will be applicable to the FSCS under deposit business for up to £85,000 per individual.

Capital at risk products

Initial capital is not 100% secure. For the Global Equity Income Plan, if any of the five share prices are lower than 50% at maturity, the initial capital will be reduced by 1% for every 1% fall of the worst performing share. Please refer to page six of the plan brochure for more information.

Costs and commission

All costs associated with this plan are taken into account in the pricing of the plan. No additional costs are taken off the investment amount for the initial placing or ongoing investment management of the plan. These charges take into account commission payable to Mattioli Woods and this is calculated at 3% for each plan. In effect, if the plan lasts for six years, the management fee would be the equivalent of 0.5% per annum.

Citigroup

Citigroup is an American multi-national financial services firm which can trace its roots back to 1812. Citigroup is organised into four main segments, being consumer banking, securities, brokerage and asset management, and consumer lending. Citigroup has over 200 million customer accounts, does business in more than 160 countries and employs 260,000 people worldwide. Citigroup had total assets of $1.9 trillion as at the end of 2010. Citigroup has a long-term credit rating of ‘A’- from Standard & Poor’s, ‘A3’ rating Moody’s and ‘A’ from Fitch. Standard & Poor’s classify an ‘A’-rated company as a company that has a strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.

Investment

This plan is open to SSAS, SIPP, corporate, pension and trust monies until 8 March 2012. The minimum investment is £3,000 per plan. Whilst the plan would be very effective for pension schemes which are fully tax exempt, you may wish to consider the plan for personal investments. Any growth payments from this plan are likely to be subject to Capital Gains Tax. Any gain derived when investing through an ISA would be fully tax exempt.

Further details and investment placing

For further information on the Walker Crips Global Equity Income Plan, click here to view as a pdf.

To discuss this product in more detail, please contact us.

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