Market Range Deposit Issue 2

Looking for the potential to receive an annual return for four years that’s dependant on the performance of the FTSE 100? Market Range Deposit Issue 2 could be right for you.

The last date applications can be accepted is 27 April 2012. However, the offer may close early if fully subscribed.

The FTSE 100 Index is an index of the largest 100 UK companies, by Market Capitalisation (calculated by multiplying the number of shares of a company by its share price to give its size), listed on the London Stock Exchange. These 100 companies represent approximately 84.35% of the total market of all UK companies listed on the London Stock Exchange. The Index includes shares of companies such as BP, Vodafone Group, GlaxoSmithKline, Unilever and Tesco. It is the most widely used index for tracking the UK stock market. The Index is maintained by the FTSE Group and was launched on 3 January 1984.

Source: www.ftse.com 30 June 2011.

For each Business Day in a year that the FTSE 100 Index closes within the Specified Range, the Annual Return will accrue. The Annual Return is calculated as follows:

Number of Business Days the Closing Level of the Index is within the Specified Range divided by the number of Business Days in the year x 6%

The maximum Annual Return that can be received each year is 6% gross (6% AER). Any Annual Return will be paid to your Structured Deposit Cash Management Account (SDCMA) each year on the relevant Annual Payment Date as follows:

• 20 May 2013 (Annual Return accrued between 17 May 2012 – 16 May 2013)
• 20 May 2014 (Annual Return accrued between 17 May 2013 – 16 May 2014)
• 19 May 2014 (Annual Return accrued between 17 May 2014 – 16 May 2015)
• 18 May 2016 (Annual Return accrued between 17 May 2015 - 16 May 2016)

The Specified Range will be determined on the Start Date when the Initial Level of the Index is known.

Using actual historical data of the FTSE 100 Index, we have calculated the lowest, the highest and the average Annual Returns that would have been generated by this product maturing at the end of each month between January 1988 and January 2012. From a potential four year total return of 24% (4 years x 6% gross per annum) the following would have been achieved:

Highest total return - 18.14% gross (4.25% AER) maturing 5 January 1994

Lowest total return - 2.77% gross (0.68% AER) maturing 5 January 2005

Average total return - 2.77% gross (0.68% AER)

These figures refer to simulated past performance produced using actual historical data. Neither actual past performance nor simulated is a reliable indicator of future results.

Source: RBS Global Banking and Markets, Bloomberg 9 January 2012.

Should you wish to close your Account during the Term you will receive the Redemption Value of your Deposit less an administrative charge of £250. An estimate of the Redemption Value can be provided upon request and you will be given the opportunity to withdraw your instruction to close the Account should you wish to do so.

• What is the Market Range Deposit Issue 2?
• Could I lose my money?
• How do I open an Account?
• What is the minimum deposit amount?
• Can I add to my Account?
• Can I close the Account early?
• Will I pay any charges?
• What updates will I receive to track the performance of my Account?
• What risks do I need to consider before opening an account?
• What about tax?
• What happens to my funds between the date on which my Account is opened and the Start Date of the four year term?
• What happens if the Index is outside the Specified Range?
• Is the Account right for me?
• Do I have to apply by a certain date?

What is the Market Range Deposit Issue 2?

The Market Range Deposit (the Account) is a four year deposit linked to the FTSE 100 Index. Whether or not you receive any return on your Deposit will depend on the performance of the Index over the term of the Account. You’ll receive 100% of your Deposit if you keep your money in the Account until the Maturity Date (subject to the risks described below).

Could I lose my money?

The Account is designed to return your Deposit at the end of the four year term, irrespective of the performance of the Index. However, you could still lose some, or all, of your Deposit if the Bank defaults or becomes insolvent.

How do I open an Account?

Simply complete the application form. Your Account, along with a Structured Deposit Cash Management Account (SDCMA) in the same name, if required, will be opened once the application has been returned together with the required documentation.

What is the minimum deposit amount?

The minimum deposit amount is GBP 10,000.

Can I add to my Account?

No. You cannot add to or amend your Deposit after the Closing Date for applications.

Can I close the Account early?

There is no ‘cooling off period’. The Account is designed to have a four year term and we can only ensure your capital is protected if the funds remain in the Account for the Term, though you are always subject to the counterparty risk of the Bank. A request to close your Account prior to the Maturity Date will only be permitted at the Bank’s discretion and may mean that you receive less than your Deposit.

Should you wish to close your Account during the Term you will receive the Redemption Value of your Deposit less an administrative charge of £250. An estimate of the Redemption Value can be provided upon request and you will be given the opportunity to withdraw your instruction to close the Account should you wish to do so.

Will I pay any charges?

All costs are already factored into the Account, so there are no additional fees or charges to pay providing you do not close your Account before the end of the Term.

What updates will I receive to track the performance of my Account?

You will receive an initial confirmation that your Account has been opened. We will then send you annual updates on the performance of your Account. A separate communication will also be forwarded to you approximately six weeks prior to Maturity Date.

What risks do I need to consider before opening an account?

It is important that you consider the following before deciding whether the Account is right for you.

• The Account has a fixed term of four years and is not suitable if you need easy access to your money or require regular income. If you need to close your Account before the Maturity Date, you may not receive back the full amount deposited. Partial withdrawals from the Account are not permitted in any circumstances. There is no ‘cooling off’ period for you to change your mind and get your money back once your application has been accepted.
• The use of the word ‘protected’ in relation to this Account refers only to our obligation to repay your Deposit at the Maturity Date, however, if the Bank defaults or becomes insolvent, then you may lose some, or all, of your Deposit. The Account is not guaranteed by any third party.
• As your Account is held in the Isle of Man, in the unlikely event of the Bank defaulting or becoming insolvent, you would not be afforded protection from the UK’s Financial Services Compensation Scheme. Your Account and the SDCMA will be opened and maintained in the Isle of Man. As a result, you may be afforded the protection of the Isle of Man Deposit Compensation Scheme (DCS) as set out in the Compensation of Depositors Regulations 2010. You can get more information about the Isle of Man Depositors’ Protection Scheme at www.fsc.gov.im/investor/dep_comp.xml.
• Funds deposited in the Account are not invested directly into the shares of the underlying listed companies. Instead, your funds are held in a deposit account with the Bank with Annual Returns linked to the performance of the Index. As you do not invest directly in shares, you will not receive any dividend payments.
• The Index is exposed to equity markets. Prospective customers should understand that investments in instruments relating to equity markets may be negatively affected by global economic, financial and political developments, and that such developments, among other things, may have a material effect on the performance of the Index.
• The account is available in Sterling only.
• Although your Deposit is protected if the Account is held until maturity (subject to the risks described above) the return from the Account may not be as much as if you had invested in a traditional deposit account.
• Inflation may reduce the purchasing power of your Deposit and any returns that you receive annually and on the Maturity Date.
• The Annual Return is limited to 6% per annum. If the FTSE 100 Index is always outside the Specified Range, no Annual Return would be paid.

What about tax?

• If you are resident in the European Union (EU) you may be affected by the EU Savings Tax Directive (EUSD).
• The Bank will automatically exchange information about your identity and residence, the amount of savings income earned and the period it relates to with the tax authorities in the Isle of Man.
• More information on how the EUSD affects your accounts can be found in our Guide to the EU Savings Directive or by speaking to your normal point of contact.
• Please note our understanding is that any return on the Maturity Date from the element of the Account linked to the Index is not currently subject to Exchange of Information. In providing this information we are not acting as tax advisers and we strongly recommend that you seek independent professional advice for your personal circumstances as regards to all aspects of this Deposit.
• The Bank is not able to advise on any subsequent changes in legislation that may effect the Account or your return from it. It is your responsibility to declare any income and returns to the appropriate tax authorities.
• The statements above are not intended to be, nor should they regarded as, legal or tax advice and you should consult your own tax advisor to obtain advice about your particular tax treatment in relation to the Account. Tax treatment depends on your individual circumstances and may be subject to change in the future.

What happens to my funds between the date on which my Account is opened and the Start Date of the four year term?

Your funds will be placed on deposit until the Start Date and will earn interest at 0.50% below the Bank of England Base Rate, provided that interest will not be less than 0.50%. Any interest earned prior to the Start Date will be added to your initial deposit and the total amount deposited into your Account. You must ensure that there are cleared funds in your Account by 10 May 2012.

What happens if the Index is outside the Specified Range?

If the Index is outside the Specified Range on any Business Day in a year, the Annual Return accrual for that Business Day would be zero. However, whatever the performance of the Index during the Term of your Account, your Deposit is protected by the Bank against any movements, providing you don’t close the Account before the end of the Term. However, note that you are subject to counterparty risk: if the Bank defaults or becomes insolvent, you may lose some, or all, of your Deposit.

Is the Account right for me?

This Account may be right for you if:

• You’re happy to hold your Deposit for the full four years.
• You’re looking for the potential to receive an annual return for four years that’s dependent on the FTSE 100 Index remaining within the Specified Range.
• You do not want a fixed return.

Do I have to apply by a certain date?

The final date that applications can be accepted is 27 April 2012. However, the offer may close early if fully subscribed.

Account - the Market Range Deposit account, a fixed term deposit account linked to the Index, opened and maintained in the Isle of Man.

AER - the Annual Equivalent Rate. It shows what the interest rate would be if it was paid once each year. This lets you compare interest rates across different accounts and what return you can expect from your savings over time.

Annual Payment Dates - means for Year 1, 20 May 2013; for Year 2, 20 May 2014; for Year 3, 19 May 2015 and for Year 4, 18 May 2016.

Annual Return - means a maximum return of 6% and a minimum return of 0%, calculated as follows;

6% x number of Business Days the Closing Level of the Index was within the Specified Range/total number of Business Days in the year

Business Day - means a day on which commercial banks and foreign exchange markets settle payments and are open for general business in London and the Isle of Man and any scheduled Trading Day that is not a Disrupted Day.

Closing Date - means 27 April 2012, being the last date applications can be accepted.

Closing Level - the closing level of the Relevant Index on each Scheduled Trading Day that is not a Disrupted Day.

Date of Acceptance - the date on which we are in possession of both cleared funds and any information and documentation that may be required by us. If any of that documentation or information is not received before the offer is withdrawn or fully subscribed, we may be unable to open the Account for you and any funds received by the Bank will be returned to you in full without interest.

Deposit - the sum deposited prior to the Start Date together with any interest earned from, and including, the Date of Acceptance to, but excluding, the Start Date.

Disrupted Day - any Scheduled Trading Day on which the Stock Exchange or any related Exchange fails to open for trading during its regular trading session, or on which a Market Disruption Event has occurred.

Expiry Date - 17 May 2016 unless not a Scheduled Trading Day or a Disrupted Day in which case take the next Scheduled Trading Day that is not a Disrupted Day. This is the date on which any additional return will be calculated, subject to condition 16 of the brochure – “Alternatives and amendments”.

Index - means the FTSE 100 Index.

Initial Level - means the closing level of the Index on the Start Date. If the Start Date is not a Scheduled Trading Day or is a Disrupted Day, the closing level of the Index will be taken on the next Scheduled Trading Day that is not a Disrupted Day.

Last Date for Funds - means 10 May 2012, the date by which funds must be received. .

Market Capitalisation - calculated by multiplying the number of shares of a company by its share price.

Market Disruption Event - any material event which disrupts (i) the exchanges or futures exchanges upon which the constituents of the Index are traded or (ii) the ability of the Index Sponsor to trade or obtain values for the constituents of the Relevant Index.

Maturity Date - 18 May 2016, the date on which the Deposit and any additional return will be repaid. If the Expiry Date is subject to condition 16 – "Alterations and amendments", then the Maturity Date shall be the latter of the 18 May 2016 and the tenth Business Day following the Expiry Date.

Redemption Value - the fair market value of the Deposit, which depends on various factors such as interest rates and the performance of the Index, less any costs relating to the unwinding of any hedging and funding arrangements.

Related Exchange – means each exchange on which options and futures contracts relating to the Index are traded.

Scheduled Trading Day - any day on which the Relevant Index is scheduled to be published.

SDCMA - means a Structured Deposit Cash Management Account. This is a Cash Management Account as detailed within our Personal or Business Banking Terms & Conditions (as applicable) opened with the Bank for repayment of maturing funds and, any additional return and interest earned.

Security Details - the identifying words, codes and/or numbers agreed between you and us that are used in the security procedure and for identification purposes.

Specified Range - is the range within which the Closing Level of the Index must fall in order to accrue the Annual Return. This range is all numbers from and including 90% of the Initial Level to and including 120% of the Initial Level.

Start Date - means 17 May 2012.

Stock Exchange - the London Stock Exchange

Term - the period from, and including, the Start Date to, and including, the Final Maturity Date.

‘the Bank’, ‘we’, ‘us’ and ‘our’ - each mean The Royal Bank of Scotland International Limited.

‘you’, ‘your’ - means you, the person(s) in whose name the account is opened.