Speak to usTo register, or if you want to find out more, please contact:

Jonathan Chesebrough T: +44 (0)20 7085 3989 E: jonathan.chesebrough@rbs.com

Colin McKee T: +44 (0)20 7085 0039 E: colin.mckee@rbs.com

or visit rbsm.com

These accounting requirements are forcing many organisations to rethink and review their funding and hedging strategies, as inappropriate selection or designation of hedging instruments can preclude the application of hedge accounting. This has the potential to result in significant levels of profit and loss account and equity volatility in the financial statements.

For those companies seeking to obtain hedge accounting for their hedge relationships, there are a number of criteria which must be satisfied, one of which is proving that a hedge is highly effective. At RBS we have developed and subsequently enhanced a web-based Hedge Accounting Toolkit to help our clients perform hedge effectiveness assessments, as these tend to be the most technical and computationally intensive of the hedge accounting requirements.

The RBS Hedge Accounting Toolkit is a user-friendly application that performs certain calculations, the results of which can assist users with the determination of whether a hedge relationship qualifies for hedge accounting. Clients simply enter the details of the hedged item (e.g. a loan or a bond), the hedging instrument (e.g. an interest rate swap), and choose between different methods of assessing effectiveness. The outputs include changes in the fair values or cash flows of the hedged item and hedging instrument due to the hedged risk, as well as offset ratios and other statistical results such as regression.

The RBS Hedge Accounting Toolkit is available free of charge to selected clients, through www.rbsm.com

The benefits of the Toolkit The Hedge Accounting Toolkit can assist in preparing the initial and ongoing assessments of hedge effectiveness. It provides access to a valuation engine and historical market data in a user-friendly environment, which can be used to calculate changes in fair value and cash flows of hedging instruments and hedged items.

Why we have developed the Toolkit The addition of the Hedge Accounting Toolkit to our range of customer services is in direct response to customer requests for solutions in this field. This demonstrates our commitment to our corporate clients within Risk Solutions.

How to access the Toolkit Speak with your RBS sales contact or one of the contacts listed above. They can provide you with a log-in and password. Once these are obtained, the Hedge Accounting Toolkit can be accessed via the ‘Toolkit’ tab on the menu bar in www.rbsm.com. The types of hedge relationships supported • Cashflowhedges • Fairvaluehedges • Netinvestmenthedges

Web-based tool to assess hedge effectivenessAt RBS we recognise that IAS 39 and FAS 133 have had, and continue to have, a significant impact on our clients.

Hedge Accounting Toolkit

RBSMarketplace

The effectiveness testing methodologies supported by the Toolkit Users can choose between several different methods of assessing hedge effectiveness, for both prospective and retrospective testing, including: • Regression • HypotheticalDerivative • PVVariableCashFlows • SpotAssessment • Spot-To-Fair-Value

New features in version 2 • Amortisingandaccretingnotionalprincipal profiles can be copied and pasted into the Toolkit direct from Excel. • Multiplestressscenarioscanbecreated and saved such that a single scenario test can incorporate several different stresses. These stresses can be re-selected and applied in subsequent tests, eliminating the need to re-input scenario data at each testing date.

• BothPeriod-on-Periodmovementsand CumulativeDifferencescanbedisplayed within the results page, and regression test output includes the F-and T-statistics. • Historicalratefixingscanbeeasilyapplied to instruments using historic RBS data. • Testingcapabilitiesenhancedtoinclude a series of foreign currency cash flows hedged using a strip of forward foreign exchange contracts.

• Moneymarketandcross-currencybasis spreads are included for a range of major currencies.

• Theabilitytoincludeafixedcreditspreadin the discount rates used to value the hedged item in fair value hedges.

rbsm.com

The contents of this document are indicative and are subject to change without notice. This document is intended for your sole use on the basis that before entering into this, or any related transaction, you will ensure that you fully understand the potential risks and return of this, and/or any related transaction and determine it is appropriate for you given your objectives, experience, financial and operational resources, and other relevant circumstances. You should consult with such advisers as you deem necessary to assist you in making these determinations. The Royal Bank of Scotland plc (“RBS”) will not act and has not acted as your legal, tax, accounting or investment adviser or owe any fiduciary duties to you in connection with this, or any related transaction and no reliance may be placed on RBS for advice or recommendations of any sort. RBS makes no representations or warranties with respect to the information, and disclaims all liability for any use you or your advisers make of the contents of this document. Where the document is connected to OTC financial instruments you should be aware that over-the-counter derivatives (“OTC Derivatives”)canprovidesignificantbenefitsbutmayalsoinvolveavarietyofsignificantrisks.AllOTCDerivativesinvolveriskswhichinclude(inter-alia) the risk of adverse or unanticipated market, financial or political developments, risks relating to the counterparty, liquidity risk and other risks of a complex character. In the event that such risks arise, substantial costs and/or losses may be incurred and operational risks may arise in the event that appropriate internal systems and controls are not in place to manage such risks. Therefore you should also determine whether the OTC transaction is appropriate for you given your objectives, experience, financial and operational resources, and other relevant circumstances. RBS and its affiliates, connected companies, employees or clients may have an interest in financial instruments of the type described in this document and/or in related financial instruments. Such interest may include dealing, trading, holding, acting as market-makers in such instruments and may include providing banking, credit and other financial services to any company or issuer of securities or financial instruments referred to herein.

RBSisauthorisedandregulatedintheUKbytheFinancialServicesAuthority,inHongKongbytheHongKongMonetaryAuthority,inSingaporebytheMonetaryAuthorityofSingapore,inJapanbytheFinancialServicesAgencyofJapan,inAustraliabytheAustralianSecuritiesandInvestmentsCommissionandtheAustralianPrudentialRegulationAuthorityABN30101464528(AFSLicenceNo.241114)andintheUS,bytheNewYorkStateBankingDepartmentandtheFederalReserveBoard.Thefinancialinstrumentsdescribedinthedocumentaremadeincompliance with an applicable exemption from the registration requirements of the US Securities Act of 1933.

The Royal Bank of Scotland plc.RegisteredinScotlandNo.90312.RegisteredOffice:36StAndrewSquare,EdinburghEH22YB. The daisy device logo, RBS and The Royal Bank of Scotland are trade marks of The Royal Bank of Scotland Group plc.

29-0811Nov2011