2017 Guide to Deferral

Transcription

1 2017 Guide to Deferral This guide explains the bank s deferral policy applying to bonuses awarded for the 2016 Performance Year. If your award is in a different currency, this table will help you select the right guide. GBP US Dollars Euros India Rupees Hong Kong Dollars Singapore Dollars Poland Zloty 25,000 33,879 30,606 2,275, ,989 46, ,558

2 A guide for anyone getting up to 25,000 This guide applies to everyone at RBS But the way you are taxed can vary from country to country. For more details check the tax note for your location. Award Terms and Conditions How we pay bonuses and the rules of the RBS 2014 Employee Share Plan are largely the same as last year. But we do need you to read and understand the Terms and Conditions that apply to your award. If you re happy with the award terms then no action is required, If you re not happy, you can decline the terms and we won t pay your award and we will recover any amount already paid, including the 2,000 paid in March. How we pay your bonus You ll get up to 2,000 included in your pay in March, and anything else as a cash bond in June. If we re not paying you in GBP We ll work out your payments based on the average foreign exchange rates for the year up to 31 December Here s what that looks like for our main currencies: Actions - Read and understand your Award Terms and Conditions. You can find a link to a copy of the 2017 Terms and Conditions in your pay statement. - Review the Malus, Clawback and Leaver section under the Important information section within this document. - Read the Tax note for your jurisdiction. - If you Accept the Award Terms and Conditions - No action required. - If you Decline the Award Terms and Conditions - You must advise your line manager before 17 March GBP US Dollars Euros India Rupees Hong Kong Dollars Singapore Dollars Poland Zloty Up to 2,000 Up to 2,710 Up to 2,448 Up to 182,078 Up to 21,039 Up to 4,201 Up to 10,684 Next 23,000 Next 31,168 Next 28,158 Next 2,093,900 Next 241,950 Next 48,317 Next 122,873 Awards under 25,000

3 A guide for anyone getting more than 25,000 This guide applies to everyone at RBS But the way you are taxed can vary from country to country. And, if you re based in the US, for example, there s some extra information you ll need to be aware of. For more details check the tax note for your location. Award Terms and Conditions How we pay bonuses and the rules of the RBS 2014 Employee Share Plan are largely the same as last year. But we do need you to read and understand how the Terms and Conditions apply to your award. If you re happy with them, this year, you ll need to accept these terms so that your award can be paid. If you re not happy, you can decline the terms and we won t pay your award and we will recover any amount already paid, including the 2,000 paid in March. When the award acceptance window opens in March, we ll give you more details on how you can accept or decline the Terms and Conditions of your award. You will be able to complete this process on the Your Shares website. How we pay your bonus You ll get 2,000 included in your pay in March and up to the next 23,000 as a cash bond in June. Anything above that will be deferred over three years and delivered in four equal instalments of RBS shares shortly after the vesting dates below: Vesting 1 Vesting 2 Vesting 3 Vesting 4 7 June March March March 2020 If you re a Material Risk Taker, see the next section for further information on how your bonus will be paid. If we re not paying you in GBP We ll work out your cash payments based on the average foreign exchange rates for the year up to 31 December To work out the number of RBS shares you ll get, we ll use the average closing RBS share price on the London Stock Exchange over the five dealing days from 27 February to 3 March 2017 inclusive. For non-uk based employees, we ll use the average foreign exchange rate for your currency over the same period. You ll be able to see the full breakdown of your award two weeks after you receive your pay statement This will be available in your own Your Shares account, but in the meantime, there s a deferral calculator you can use to find out when you ll get your award. Actions - Read and understand your Award Terms and Conditions when the award acceptance window opens. - Review the Malus, Clawback and Leaver section under the Important information section within this document. - Read the Tax note for your jurisdiction. - If you Accept the Terms and Conditions of your award - Login to Your Shares between 13 March - 7 April 2017 and click on Award Acceptance and then follow the instructions to Accept. - If you Decline the Terms and Conditions of your award - Login to Your Shares between 13 March - 7 April 2017 and click on Award Acceptance and then follow the instructions to Decline. Awards over 25,000

4 Material Risk Takers (MRTs) How we pay bonuses to MRTs is largely the same as last year. However, due to change in the Prudential Regulatory Authority (PRA) Remuneration Rules, the deferral period that applies to your bonus can now vary between three, five and seven years, depending on your MRT role. MRT role category PRA Senior Manager MRTs FCA Senior Manager MRTs Risk Manager MRTs All other MRTs Deferral Period 7 years 5years 3 years If you were an MRT during the 2016 performance year, you ll have received a letter in 2017 telling you the category and deferral period that applies to you. If you don t know which category applies to you, please contact ~ MRT Data Mailbox. MRT de minimis If you were MRT de minimis for 2016 performance year, your bonus will be subject to the bank wide deferral schedule and any RBS shares you may receive will not be subject to a retention period when they vest. How we pay your bonus You can find more information and an example of each MRT deferral schedule by navigating through the next few pages. You ll be able to see the full breakdown of your award two weeks after you receive your pay statement This will be available in your own Your Shares account, but in the meantime, there s a deferral calculator you can use to find out how and when your bonus will be delivered by selecting the MRT role category that applies to you. Share retention RBS shares for Material Risk Takers are subject to a retention period (normally 6 months or 12 months in the Netherlands) after vesting. During this time you will be unable to sell or transfer your RBS shares. At the end of the applicable retention period your RBS shares will be released to you. The de minimis criteria are as follows: Variable remuneration (bonus + long term incentive + other incentives) is no more than 33% of your total remuneration, and Total remuneration does not exceed 500,000 (or local currency equivalent). Total remuneration is defined as variable remuneration + (salary + fixed allowances (including any role based allowance) + pension + benefit funding). MRT Awards

5 Material Risk Takers - 3 year deferral MRTs You ll receive 2,000 in your March pay, up to 23,000 as a cash bond and up to 25,000 in RBS shares in June. The balance of your award will be deferred in equal installments of RBS shares over 3 years. Year 1 Year 2 Year 3 Award Value 7 March June June March March March 2020 Up to 125,000 For the remainder Cash Current Year (Year 0) Bond 2,000 Up to 23,000 Up to 25, % RBS shares The remainder (and a minimum of 40%) is delivered in 3 equal instalments on each anniversary of the award. Where your award is below 125,000, the deferred bond and share vesting in June 2017 will be adjusted to ensure the minimum deferral requirement is met and at-least 50% of your current year award is delivered in RBS shares. These adjustments are needed to ensure we are compliant with regulatory requirements. Example is based on an award of 150, ,000 31,250 31,250 Where your award is more than 125,000, you ll also receive 25% of the remainder over this value in RBS shares in June Use the deferral calculator online to find out what this means for you. 23,000 31,250 23,000 31,250 RBS Shares Bonds 2,000 2,000 Cash Total Mar 17 Jun 17 Vesting Date Mar 18 Mar 19 Mar 20 Note: All RBS shares are subject to a 6 month retention period on vesting (12 months in the Netherlands). MRT Awards

6 Material Risk Takers - 5 year deferral Risk Manager MRTs and FCA Senior Managers MRTs You ll receive 2,000 in your March pay, up to 23,000 as a cash bond and up to 25,000 in RBS shares in June. The balance of your award will be deferred in equal installments of RBS shares over 5 years. Where your award is below 125,000, the deferred bond and share vesting in June 2017 will be adjusted to ensure the minimum deferral requirement is met and at-least 50% of your current year award is delivered in RBS shares. This adjustment is needed to ensure we are compliant with regulatory requirements. Year 1 Year 2 Year 3 Year 4 Year 5 Award Value 7 March June June March March 2019 RBS shares 7 March March March 2022 Cash Bond RBS shares Up to 125,000 For the remainder Current Year (Year 0) 2,000 Up to 23,000 Up to 25, % Example is based on an award of 150, ,000 18,750 The remainder (and a minimum of 40%) is delivered in 5 equal instalments on each anniversary of the award. 18,750 18,750 18,750 18,750 Where your award is more than 125,000, you ll also receive 25% of the remainder over this value in RBS shares in June ,250 RBS Shares Use the deferral calculator online to find out what this means for you. 23,000 2,000 2,000 23,000 Bonds Cash Total Mar 17 Jun 17 Mar 18 Vesting Date Mar 19 Mar 20 Mar 21 Mar 22 Note: All RBS shares are subject to a 6 month retention period on vesting (12 months in the Netherlands). MRT Awards

7 Material Risk Takers - 7 year deferral PRA Senior Manager MRTs You ll receive 2,000 in your March pay, up to 23,000 as a cash bond and up to 25,000 in RBS shares in June. 10% of your award will vest in March 2018 and 2019 and the balance will be deferred in equal installments of RBS shares between March Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Award Value 7 March June June March March March March March March March 2024 Up to 125,000 For the remainder Cash Current Year (Year 0) Bond 2,000 Up to 23,000 Up to 25,000 10% 10% % 10% 10% Example is based on an award of 150,000 RBS shares The remainder (and a minimum of 40%) is delivered in 5 equal instalments on each anniversary of the award. Where your award is below 125,000, the deferred bond and share vesting in June 2017 will be adjusted to ensure the minimum deferral requirement is met and at-least 50% of your current year award is delivered in RBS shares. This adjustment is needed to ensure we are compliant with regulatory requirements. 125,000 10% 13,500 15,000 10% 15,000 13,500 13,500 13,500 13,500 Where your award is more than 125,000, you ll also receive 10% of the remainder over this value in RBS shares in June ,000 23,000 27,500 RBS Shares Bonds Use the deferral calculator online to find out what this means for you. 2,000 Total 2,000 Mar 17 Jun 17 Mar 18 Mar 19 Vesting Date Mar 20 Mar 21 Mar 22 Mar 23 Mar 24 Cash Note: All RBS shares are subject to a 6 month retention period on vesting (12 months in the Netherlands). MRT Awards

8 Important information about your award Leaver information If you leave you might still have unvested awards. The table below details what will happen to your unvested awards under the 2014 Employee Share Plan, depending on your reason for leaving. It s just a summary, so take a look at the guidance on the deferred awards pages on Insite if you want to understand more. If you ve got any questions, deferredaward@rbs.co.uk. Reason for leaving Resignation Redundancy Retirement (as defined in the 2014 Employee Share Plan) Dismissal Ill heath, injury or disability (as defined in the 2014 Employee Share Plan) Death in service Where a business ceases to be part of the bank Employee Share Plan You ll forfeit any unvested awards scheduled to vest to you after you leave the bank s employment. You ll continue to receive your unvested awards after you leave the bank s employment. You don t need to take any action. Retirement before your 55th birthday This will be handled in the same way as resignation and you ll forfeit any unvested awards. Retirement on or after your 55th birthday You ll continue to receive your unvested awards scheduled to be paid to you after you leave the bank s employment if you meet the following criteria as detailed in the ESP Leaver Policy, to find out more about this criteria contact ~ Deferred Award. Broadly, the retirement criteria are: - You re not employed or engaged with a principal competitor of the bank, and - Your role is not commensurate with your role at RBS. To receive your awards, you need to complete a Retirement Declaration Form and get it signed by your line manager to confirm that you meet the retirement criteria. If you don t complete the form before you leave the bank, any unvested awards will be handled in the same way as resignation. Compulsory retirement You ll continue to receive your unvested awards after you leave the bank s employment. You don t need to take any action. You ll forfeit any unvested awards scheduled to vest to you after you leave the bank s employment. If you are leaving the bank due to ill-health, injury or disability reasons as determined by the Share Plan Expert Centre under the specific criteria set out in the ESP Leaver Policy you ll continue to receive your unvested awards after you leave the bank s employment. In the case of an employee s death, a cash payment equivalent to the market value of their unvested awards on the date of death will be paid to their personal representatives following production of a valid grant of probate or local equivalent. Under the rules of the 2014 Employee Share Plan, if the business in which you work in is transferred outside of the bank you will keep any unvested awards as long as you remain employed up to the point of sale. Important Information

9 Important information about your award Malus and Clawback In certain circumstances the rules of our plans let the bank reduce or cancel your bonus before it vests (called malus ) or recover it after your bonus has been paid (called clawback ). We may apply the malus and clawback provisions if we become aware of information that would have affected the decision about your bonus and in certain circumstances if issues arise after your bonus has been granted. If you were told that you were a Material Risk Taker during 2016, the current RBS clawback policy makes it possible for RBS to require you to repay some or all of your Award for up to 7 years from the grant date. If you performed a senior managment function role during 2016 (eg. PRA and FCA Senior Managers under the Senior Manager Regime), the clawback period that can be applied to your award can be extended to 10 years if you are the subject of an investigation which could result in the application of clawback and this investigation is not completed prior to the seventh anniversary of the grant date. Clawback can be applied for 6 months from the date your award vests if you re not an MRT. These provisions continue to apply even if you leave the bank. You can find out more by reading our malus and clawback policies on the deferred awards pages. Personal hedging rules UK remuneration regulations stipulate that you must not use any personal hedging strategy, or remuneration-related or liability-related contracts of insurance, which is designed to lessen the impact of a reduction in the value of your bonus. Where to find out more Deferred Award pages Deferral Calculator Your Shares Malus policy guideline Clawback policy guideline Personal Account Dealing (PAD) Policy The 2014 Employee Share Plan Rules Tax Notes For example, you can t enter into any arrangement with a third party under which you would receive a payment that is linked to a reduction in the value and/or number of RBS shares subject to your award. These regulations are in place to encourage sound and effective risk management. Important Information

10 Important information about your award If you re getting RBS shares You ll be able to manage them through your own Your Shares account. If you don t have a Your Shares account yet, we ll set one up for you and let you know when we ve done that. Your Shareholder Reference Number and PIN Keep your Shareholder Reference Number (SRN) and PIN safe. You ll need them to get into your Your Shares account. Make sure you keep your personal details up to date Remember, the details recorded on your own Your Shares account may not necessarily be the same as the details you hold on Insite under My Information. By keeping your personal and bank account details up to date, we will be able to contact you when important information is available on Your Shares. You can check or update your personal details by selecting the My Profile section on Your Shares. Important Information

11 Important information about your award Personal Account Dealing Policy It s your responsibility to stay compliant when selling your RBS shares You need to follow all the rules and regulations around share dealing, including any local rules and the Personal Account Dealing (PAD) Policy. If you ve been told you re an Insider you re only able to sell your RBS shares during designated Open Windows and you ll also need to get permission before you do this. There are other restrictions that apply to employees who are on certain confidentiality registers (eg Stage 2 Confidentiality Registers). You should never buy or sell RBS shares if you think you are in possession of inside information. This is to protect you and the bank from any criticism and, in particular, to protect you if anyone accuses you of using inside information for your own benefit. As well as on Insite, you can read the PAD Policy on Your Shares. Just click on Plan Documentation. There are still rules that that apply even after you leave Although you will no longer be subject to the PAD Policy when you leave, you should be aware that the sale (or purchase) of any RBS shares after your leaving date will still be subject to legislation relating to insider dealing and market abuse (breaches of which may lead to criminal and/or civil liability). Important Information

12 Vesting FAQs Answers to questions you might have about the vesting of your awards, and what you can do with your RBS shares once your award has vested. Click here to see the Vesting FAQs for Internationally Mobile Employees (IMEs) and Offshore Assignees (OSAs). Where can I find out about my awards due to vest during 2017? You can view your award portfolio on Your Shares to see which awards are due to vest during You can view it anytime by logging into your account (via You ll need your Shareholder Reference Number and PIN to access your account. How do I go about selling any RBS shares I ve received as part of my vesting? Any RBS shares you receive following the vesting of your deferred award(s) and/or LTIP award(s) will be held in a nominee account which can be accessed through Your Shares. You ll be able to sell your RBS shares if you wish through your personal Your Shares account, subject to complying with the PAD Policy. Are there tax implications I need to be aware of for the RBS shares I ve received? Tax legislation relating to awards differs depending on where you were when the award was granted and where you are when it vests. You can find a summary of the tax implications for each jurisdiction on the deferred awards pages on Insite and under Plan Documentation on Your Shares, but you may need to obtain specific guidance from a financial or tax adviser. If you ve been internationally mobile, or on an offshore assignment, the tax position is more complex. Please see the Vesting FAQs for IMEs for further information. If you re based in a jurisdiction where taxes and/or social security liabilities on vesting are accounted for through payroll (a withholding jurisdiction), we ll make arrangements to discharge these tax liabilities on your behalf, using an estimated tax rate determined by your payroll department. If however you re based in a jurisdiction where you re responsible for making your own tax declaration/payment locally, then you ll receive the full number of your RBS shares on vesting and you ll be responsible for settling these tax liabilities yourself. Please remember that you re responsible for the declaration and payment of your own capital gains/losses tax liabilities. Further details of the base cost of your vested RBS shares for capital gain/loss purposes will be included in your 2017 Vesting Tax Statement which you ll get from Computershare after the applicable vesting date. How are the tax and social security liabilities due on my RBS shares calculated? In most jurisdictions, tax and social security liabilities are calculated with reference to the value of your share award on the vesting date. We calculate the taxable value by multiplying the RBS shares which vested to you by the closing price on the vesting date. If you re based in Guernsey or Italy, a different share price will be used in accordance with local tax rules and this will be detailed in your 2017 Vesting Tax Statement when it is made available to you. How do I know if I m in a withholding country? You can find further information on the relevant country on the Tax Information section of the deferred awards page or on Your Shares by selecting Plan documentation, but you may need to obtain specific guidance from a financial or tax adviser. When do Contract Notes become available? Contract Notes are generally available one business day after any share trade transaction has been concluded. FAQs

13 Vesting FAQs When do Post Vesting Tax Statements become available? Post Vesting Tax Statements are usually available 4-6 weeks after the vesting date. They provide a summary of the vesting value for tax purposes, which may be relevant if you need to self assess your tax liability. The Post Vesting Tax Statement will also detail your base cost for capital gains/losses tax liability. Please note if you are an IME or OSA you will receive an additional Tax Statement from our Global Tax Provider showing how your tax is calculated. Please refer to the Additional Vesting FAQs for IMEs and OSAs for further information. Are there any foreign asset reporting requirements that apply? You should note, particularly if you re located in France, India, Spain or the United States, that there may be specific reporting requirements which may require you to disclose further information relating to your vested RBS shares to your local tax authorities. Can I transfer my RBS shares out of the nominee account with Computershare? You can transfer RBS shares held in your nominee account into your own name, but not to a third party. If you decide to transfer RBS shares into your own name, these RBS shares will be removed from your nominee account and you ll receive a share certificate in respect of them. You can then transfer the RBS shares to another party if you wish. Bear in mind this transfer will be subject to the PAD Policy as it applies to you, and any applicable local laws and regulations relating to the transfer of shares. If your share certificate is misplaced and you need to request a duplicate you will need to pay for the associated costs of issuing a duplicate certificate. Can I transfer RBS shares that I already hold in share certificate form into the nominee account with Computershare? No, this is not permitted. Are there any fees or charges for holding RBS shares in the nominee account with Computershare? Keeping your RBS shares in the nominee account is free of charge. What choices are available when selling my RBS shares? You can choose to either sell your RBS shares through the share dealing service with Computershare or by using your own broker. Below are the current Computershare share dealing fees and transaction costs applicable. Transactions/Account Activity Share Transactions - Daily Sales Computershare Up to 20, % Over 20, % Minimum Share Dealing Fee 17 The wholesale FX rate spread will be reduced as follows: FX Up to 50k - 1.5% 50k - 150k - 0.8% Over 150k - 0.5% By Cheque Waived By electronic funds transfer 10 (same or another currency) Indemnification of Certificates (applies for misplaced share certificates) Based on Registrar s Fees Structure These commission rates are subject to change from time to time. FAQs

14 Vesting FAQs How do I transfer my RBS shares to my own broker? To transfer your RBS shares to your own broker, you would need to request a share certificate. Please refer to the question Can I transfer my RBS shares out of the nominee account with Computershare? What is the Online Global Payment Service provided by Computershare? The Online Global Payment Service is provided by Computershare and its banking partner and enables you to receive sale proceeds in local currency by an international wire payment. You ll pay a 10 fixed fee any time you transfer RBS share sale proceeds in a currency other than GBP Sterling using the Online Global Payment Service. Do I need to receive sale proceeds in my local currency if selling through Computershare? If you do not wish to use the conversion functionality of the Global Payment Service through Computershare, you can elect to use the international wire payment, and receive your funds in GBP Sterling (unless you live in the United States). In this case, you would be subject to your own bank s FX rate on the conversion of your GBP Sterling sale proceeds into local currency. You would need to contact your bank for further details of this FX rate. If you live in the United States, you ll also be able to request your share proceeds in GBP Sterling by cheque mailed to your registered address. You can also select GBP as a wire option for US bank accounts. Where can I find the terms and conditions applicable to the nominee account, share dealing and online payment services operated by Computershare? You can find the terms and conditions governing these services by clicking on Sell / Transferfrom my Nominee and then Transact once you log on to Your Shares. Make sure you understand the terms and conditions for each of these different services. If you ve any doubts about the suitability of making a sale through these services, you are recommended to seek independent professional advice. What are the charities that will benefit from any cash residue following the sale of RBS shares to cover my tax liability? There may be a small amount of money left over after any sale of RBS shares to cover your tax liability. The amount will be less than the value of one RBS share and will be automatically donated to charity. This is because the cost of processing, transferring and returning this amount would cost more than the residual balance. The charities that will benefit are: Cancer Research UK (No ) World Wildlife Fund for Nature UK (No ) Save the Children (No ) British Red Cross Society (No ) Shelter (No ) Can my deferred bonds/cash be invested in my RBS Pension Plan? If you re employed in the UK, Republic of Ireland, Jersey, Guernsey, Isle of Man or Gibraltar, you will have the choice to use your deferred bonds to make a one-off pension contribution to your RBS Pension Plan. Any election made will be deducted from your pay. The window for making elections for deferred bonds/cash vesting during March 2017 is open until 3 March 2017, with a second window for making elections for deferred bonds vesting during June 2017 closing on 2 June FAQs

15 Vesting FAQs I moved from a phantom share country to a country where RBS shares can be awarded will I get RBS shares instead now? The basis on which your award was made when it was granted cannot be changed, so you will retain the same award type as was granted to you. Therefore you will still receive a cash payment for existing phantom share awards. However, for awards granted in your new location, you will receive RBS shares. I am based in a non-nominee country what does this mean? In certain jurisdictions, Computershare are unable to provide the services of a nominee account due to regulatory reasons. This means you will receive a share certificate from Computershare instead. This certificate confirms your ownership of RBS shares. Share certificates are normally sent within five working days of vesting for any RBS shares you choose to keep when your award vests. This might take longer, depending on where the certificate is being posted to. If you don t receive your share certificate within three weeks of vesting you should contact Computershare on +44 (0) or US toll free on I was in a non-nominee country at the time of grant, but moved to a nominee country before the vesting of my award. What impact does this have for me? The ability to use a nominee account is determined by your location at the vesting date, and not the location you were in when your award was granted. Therefore, if you were in a non-nominee country at the time your award was granted, but move to a nominee country before the award vests, you may use Computershare to manage your share portfolio. I was in a nominee country at the time of grant, but moved to a non-nominee country before the vesting of my award. What impact does this have for me? You may not keep or sell your RBS shares through Computershare and will instead be provided with a paper share certificate upon the vesting of your award. If your award is subject to additional post vest retentions your share certificate will be sent to you at the end of the relevant retention period. FAQs

16 Additional Vesting FAQs for IMEs and OSAs Please refer to the Vesting FAQs for general vesting information However, if you have deferred and/or LTIP awards and are an Internationally Mobile Employee or an Offshore Assignee the additional information detailed below may also be relevant. What is an Internationally Mobile Employee (IME)? An IME is any employee who has relocated within RBS on either a permanent or temporary basis from one country to another. What is an Offshore Assignee (OSA)? An OSA is any employee who has relocated within RBS on either a permanent or temporary basis from the UK to an offshore jurisdiction or from one offshore jurisdiction to another. Jersey, Guernsey and Gibraltar are classified as offshore jurisdictions. Can I waive my deferred bonds to make a pension contribution? If your current terms and conditions of employment are held in the UK, Republic of Ireland, Jersey, Guernsey, Isle of Man or Gibraltar at vest, (even if you re on assignment in another country) you can elect to waive some or all of your deferred bonds to make a one-off pension contribution to your RBS Pension Plan. Any election you make will be deducted from your pay. To do this, you ll need to submit a pension election waiver by: 2 June 2017 for any deferred bonds due to vest to you on 7 June If you were in one of the above locations, but have moved permanently to a different country not on the above list, then this option is not available to you. Where will my awards be taxed? Every employee s tax position will be different and the information provided below is intended as a general guide only. You should seek independent advice for any questions regarding your personal tax affairs. Cash awards and deferred award(s) are treated differently. Cash awards are sourced to the performance year over which the award was earned. Most countries will seek to tax deferred award(s) based on where you have worked during the life of the award. The life of the award is the period over which the award is sourced for tax purposes which is between the date of grant and the date of vesting. Generally this means that any country that you have worked in during the sourcing period (even if you are no longer a tax resident there) may still seek to tax the portion of your award that relates to the time spent in that country. The country you are currently working in may then exempt the portion of the award related to your previous work location. Alternatively your current country may allow you to claim a credit for the tax you have to pay in your previous work country, up to the amount of tax payable on the same income in your current location. This has the effect that you pay tax on that portion of the income at whichever country s tax rate is higher. For the 2016 Deferred Award due to vest in March 2017, it is likely to be taxable based on the time spent in each location between the grant date of 8 March 2016 and the vest date of 7 March For the 2015 Deferred Award due to vest in March 2017, it is likely to be taxable based on the time spent in each location between the grant date of 9 March 2015 and the vest date of 7 March FAQs

17 Additional Vesting FAQs for IMEs and OSAs For the 2014 Deferred Award due to vest in March 2017, it is likely to be taxable based on the time spent in each location between the grant date of 7 March 2014 and the vest date of 7 March For the 2014 LTIP award due to vest in March 2017, it is likely to be taxable based on the time spent in each location between the grant date of 7 March 2014 and the vest date of 7 March Where will my cash award (initial 2,000 equivalent) be paid and taxed? Cash awards are sourced to the performance year over which the award was earned. Where your cash award is paid and taxed is dependent upon which type of assignment you were on during this period. For people who transferred permanently from one country to another, the general rules are as follows: If you transferred between 1 January and 31 December of the performance year, your award will normally be apportioned (paid and taxed) between the two locations, based upon the number of days spent in each country. If you transferred between 1 January and 7 March of the current year, then your cash award will normally be paid and taxed in your previous location, as you were in that country for the whole performance year. Any future payments of the deferred award granted in the current year, i.e. from June onwards, will be fully taxable and payable in the new location. For people who transferred permanently or repatriated from an assignment out of India, Switzerland, UAE or USA, a portion or all of the payment will be taxed in that location, based on the above, but the net value after tax will be paid in local currency in the new location as a non-taxable payment. What are my personal obligations in respect of tax and social security contributions due on my deferred award(s) and/or LTIP award(s)? This depends on the type of policy under which you have moved: International Assignment Policy (IA) As you are/were tax equalised, you will pay hypothetical tax at your marginal home country tax and social security rate applicable at the time of vesting on the portion of the award that relates to your international assignment. You will pay home country local taxes for the portion that relates to the time either before or after your assignment, when you were based in your home country as a local employee. Any income taxes or social security that fall due in the host country on any portion of the award where you are hypothetically taxed will be met by RBS. However, if you have localised in your host location, you will be responsible for the host country taxes and social security due on the portion of the award that relates to the time since you localised, in addition to any home country taxes. International Assignment Lite Policy (IAL) For payment relating to the time you are/were on assignment, your payment will be subject to host country local taxes. You will pay home country local taxes for the portion of your award that relates to the time either before or after your assignment, when you were based in your home country as a local employee. If you localise in your host location, you will be responsible for the host country taxes and social security due on the portion of the award that relates to the time since you localised, in addition to any home country taxes. International Relocation Policy You will be responsible for all income tax and social security charges in respect of the award in both your home and destination country, if applicable. FAQs

18 Additional Vesting FAQs for IMEs and OSAs Offshore Assignment Policy As a result of an Offshore Assignment, any deferred award(s) or long term incentives awarded by RBS or any other deferred compensation may give rise to a tax liability in both your home and host locations. To the extent that any portion of such an award creates a dual tax liability for which full double tax relief is unavailable, RBS will apply tax protection at the time of payment. This will ensure you are liable only for tax due in the home and host locations on a pro-rata basis according to where you worked between the date of grant and the date of vest. RBS will be responsible for meeting any tax liability over and above this on your behalf. How will my tax liabilities be calculated? Taxes will generally be calculated on an apportionment basis across the countries in which you were based, depending on the amount of time spent in each country. Your liability for the taxes will depend on the terms applicable under your assignment or relocation as outlined above. For deferred compensation, the vesting period begins from the original grant date, thereby increasing the vesting period for subsequent years by an additional 12 months. Therefore if you have moved at any point since your award was granted, your international movement will continue to impact future vestings. Where permitted, the tax relief method available in your current location (exemption of the foreign award amount or the credit for foreign taxes withheld) will be incorporated at the time of withholding. However the final taxable amount and tax payable may not be established until you have completed the relevant tax returns for your home and host location. If I leave RBS before the next vesting date and have moved locations since my award was granted, how will my deferred award(s) and/or LTIP award(s) be apportioned? If you re entitled to receive your award after leaving RBS, it will be apportioned depending upon the locations and length of time spent working in each location since your award was granted. However, instead of apportioning the award between the grant and vest dates, the award will instead be apportioned between the grant date and your leave date. What is a blended tax rate? When an IME or OSA has worked across more than one country during the life of the award, it is necessary to consider the tax rates in both locations when establishing their tax liability. A blended tax rate is obtained by apportioning the applicable country tax rates across the life of the award. Eg. If 25% of the time is spent in a country with a tax rate of 40% and 75% of the time is spent in a country with a tax rate of 50%, then the blended rate is: (25% x 40%) + (75% x 50%) = 10% % = 47.5% blended rate The blended tax rate takes into account these two rates, and applying this blended rate to the shares will give the correct net position of the award. What if I disagree with the apportionment method? Globally there are a number of variations in applications of the grant to vest sourcing method under different tax regimes, but RBS has applied a standard global approach to ensure consistency and global compliance for RBS. Should you wish to take a different position on your tax return, you are welcome to, but the standard approach will be followed when processing awards at the time of vesting. Will I receive any information regarding the tax calculations? Following the vesting of your awards, you will receive a Tax Statement from our Global Tax Provider showing the split of taxes on your award(s) (awards that have an international tax liability). All other awards, granted after your international mobility, will be paid and taxed through your normal payroll arrangements and will be visible on your payslip. Our Global Tax Provider will also provide a Tax Statement for any OSAs following the vesting of your awards. FAQs

19 Additional Vesting FAQs for IMEs and OSAs How will I receive my Tax Statement? Tax Statements will be uploaded to the Your Shares site after vesting, ready for you to download and view. I have not received my Tax Statement who can I contact about this? If you have not received your Tax Statement within 6 weeks of your award vesting, you can ~ IME Deferred Awards (IMEDeferredAwards@rbs.co.uk). What exchange rate will be used to convert my awards for payment in apportionment countries? Two types of exchange rates can impact awards: If the share part to your award is denominated in a currency other than GBP Sterling, the RBS share price used for granting share awards is converted into your local currency equivalent in order to establish the number of RBS shares to be granted to you. This is applicable for all employees, not just IMEs (not applicable for OSAs). If awards are being paid in more than one location, the exchange rates used to convert the awards from the holding currency (ie the currency the award was granted in, which is shown on the deferred award certificate) to the payment currency will be the exchange rates available at the end of the month prior to the date of processing the payment calculations. This is the most effective way of ensuring minimal conversion fluctuations between the payment and holding currency. When will my awards be released to me? Deferred bonds/cash awards for IMEs & OSAs will be paid on standard payroll dates in March and June. Share awards will be released to you on each vesting date, after arrangements have concluded to deduct any tax liabilities. IME awards that need to be paid in one location but are held in a different currency would need to be converted to the currency of the payment location (not applicable for OSAs). FAQs

20 Contact Computershare or RBS Deferred Awards Team If you require further assistance, you can:- Raise a Deferred Award query via Contact HR or by to ~ deferred awards (deferredaward@rbs.co.uk); or Raise an LTIP query via Computershare by to rbs.shareschemes@computershare.co.uk or using the Contact Us function in your share account. You can also contact Computershare by calling the Helpline on + 44 (0) or Web Issues? If you experience difficulty accessing the Your Shares website, please delete all existing cookies and temporary internet files on your computer. Close all your internet browser windows and try again. You can also use: Or contact the Computershare Helpline on +44 (0) or (within USA toll free). Contact