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Introduction to Debt Capital Markets

BUILDING TOMORROW™ Introduction to Debt Capital Markets Craig Rydqvist rbs. com/gbm Introduction My background Finance sector focussed education and experience but not ‘traditional’ IB route Education • • First degree – BSc in Management Studies; Postgraduate – MSc Masters in Finance (part-time). Work Experience • • • KPMG – Financial Sector Audit and Consulting (ACA); Barclays Capital – Finance followed by Trading and Structuring; RBS – Finance followed by DCM Origination.

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Current Role • • • •

Director – Conduit Origination; Sell side origination, execution and structuring; Buy side transaction analysis as RBS is ultimate risk taker; Line Manager for Global Banking Analyst Programme. Mature version of Will from the Inbetweeners RBS00000 3 Xin Miao – 2nd Year Analyst, DCM Appears geared towards Investment banking… didn’t know what they were! Education & Work Experience • • • LSE BSc in Accounting & Finance RBS Easter internship (DCM) RBS Summer internship (FI DCM) Current Role •

RBS Graduate programme – First rotation: Investment grade corporate bond origination – Second rotation (outside DCM): Energy & Resources sector RBS00000 4 RBS Investment Banking Model GBM GBM banking GBM markets Clients Equities Origination Corporate DCM and Risk solutions Syndicate FI DCM / FISF Sector and Corporate Finance Client Management Trading Sales Investors Corporate and FIG coverage Research and strategy Origination GBM Operations Distribution RBS00000 5 DCM Products DCM Products are varied and lie on a spectrum between market facing and structured • • • • • Corporate Investment Grade Bonds Financial Institution Debt High Yield Debt Liability Management Loan Origination and Syndication Structured Finance – Securitisation – Covered Bonds – FI Hybrids – Structured Corporate Debt • • Private Placements Ratings Advisory RBS offers the complete package of DCM products RBS00000 6 What DCM Originators do Origination Relationship Building Distribution Client pitches Beauty parades Market Coverage Peer Group Benchmarking Pricing Documentation Roadshows Investor contact Best deal for client

Constant dialogue with clients • Pitching / responding to Requests for Proposal • Indicative pricing and market commentary • Execution Development of a diverse skill-set • Analysis of market trends (historical and current) • Presentation skills • Ability to work across teams Day to day job • Pricing analysis • Continuous interaction with the market – new issues, market trends, demand drivers, rumours, etc • Client presentations/meetings pitching for business • Transaction facilitation including deal roadshows / investor due diligence RBS00000 7

Current League Table Standings All Currencies WE IG Corporate Bonds 15 September 2011 YTD Bookrunner 1 Deutsche Bank 2 RBS 3 BNP Paribas 4 HSBC 5 JPMorgan Total Industry Source: Dealogic Analytics Share Amount No. (%) (EURm) 9,277 52 10. 08 7,150 49 7. 77 6,294 39 6. 84 6,203 39 6. 74 5,951 26 6. 46 92,054 180 100 2013 Target Position: Top 3 All Currencies WE Corp. & FI Syndicated Loans 15 September 2011 YTD Bookrunner ^ ^ ^ ^ ? 1 BNP Paribas SA 2 Credit Agricole CIB 3 Societe Generale 4 RBS 5 HSBC Holdings PLC Total Industry Source: Thomson Reuters Share Amount No. %) (EURm) 19,092 135 7. 60 18,246 86 7. 20 16,003 93 6. 30 15,635 99 6. 20 13,443 78 5. 30 252,044 352 100 2013 Target Position: Top 3 All Currencies CEEMEA Corp. Synd. Loans 15 September 2011 YTD Bookrunner ? ? ? ^ ^ 1 Citi 2 Credit Agricole CIB 3 RBS 4 BNP Paribas SA 5 Barclays Capital Total Industry Source: Thomson Reuters Share Amount No. (%) (EURm) 3,217 27 9. 00 3,052 19 8. 60 2,561 15 7. 20 2,541 16 7. 10 1,961 6 13. 00 35,593 68 100 2013 Target Position: Top 5 ? ? ? ? ^ Cross Border Private Placements 15 September 2011 YTD

Bookrunner 1 RBS 2 BAS 3 Barclays 4 HSBC 5 CBA Total Industry Source: PP Monitor Amount (EURm) 4,543 3,994 1,902 1,775 1,528 No. 22 19 12 9 7 Share (%) 23. 80 20. 90 9. 90 9. 30 8. 00 All Currencies WE HY Corporate Bonds 15 September 2011 YTD Bookrunner ? ? ? ? ? All Currencies CEEMEA Corporate Bonds 15 September 2011 YTD Bookrunner ^ ^ ^ ^ ^ 1 Barclays Capital 2 RBS 3 Goldman Sachs 4 BNP Paribas 5 Citi Total Industry 2013 Target Position: Top 3 1 Deutsche Bank 2 Goldman Sachs 3 Citi 4 Credit Suisse 9 RBS Total Industry Source: Dealogic Analytics

Amount Share No. (EURm) (%) 4,161 35 11. 11 3,518 23 9. 40 2,922 18 7. 80 2,909 20 7. 77 1,820 16 4. 86 37,441 88 100 2013 Target Position: Top 5 Amount (EURm) 2,398 1,360 1,335 1,300 1,095 15,638 No. 13 9 8 9 6 37 Share (%) 15. 34 8. 70 8. 54 8. 31 7. 00 100 ? ? ? ? ? Source: Dealogic Analytics 2013 Target Position: Top 5 RBS is a market leader in all the major DCM products RBS00000 8 Major differences between DCM and …. Corporate Finance • • • • • • • • • Corporate Finance has lower execution volume As a result lots of time spent itching strategic ideas DCM is more transaction focussed DCM bankers have more respect for your private life Markets Markets covers, sales, trading, research and other areas so it’s a little hard to generalise Markets work more driven by market psychology and sort-term trends and relative value DCM generally more macro-economic focus so interaction is with the client C-suite Equity Capital Markets DCM bankers are pessimists, ECM bankers are optimists DCM involves more ‘definite’ maths – bond maths is less ‘speculative’ RBS00000 9 Why might I choose to work in DCM at RBS? • • • • • • •

If you are interested in how businesses work – probably at a slightly more detailed level You like maths that ‘works’ – less need to speculate on growth rates and uncontrollable factors DCM is the most successful franchise within RBS GBM and carries that kudos throughout the organisation The DCM analyst programme offers lots of variety with a minimum of 6 rotations, of which at least 4 will be within DCM If you still want to learn – we take analyst development very seriously If you want to work with great people DCM bankers have respect for your private life DCM is a great place to learn and develop

RBS00000 10 Life of a DCM analyst Fast-learner Creative and innovative thinker Attention to detail Work well under pressure • • 7. 30-8. 30am start Daily tasks: – Morning meetings – Market updates/reports – Other updates e. g. company pricing • • • Building models, producing presentations Collaboration: talking to traders, syndicate desks, Relationship Managers, other teams in DCM… Analysts events: training, networking lunch Positive Attitude RBS00000 11 Pop Quiz Should these client queries be directed to DCM, ECM, Corporate Finance, Markets or somewhere else? • • • • • • • • • •

Company CFO interested in divesting a non-core division; Institutional investor seeking to take risk on Greek sovereign default; Company CFO seeking to renew a syndicated loan facility; Bank of England seeking information on RBS exposure to Italian FIs; Company CFO seeking to understand the impact on his company credit rating of redeeming outstanding bonds; Company CFO seeking advice on complete capital restructure; Same CFO following up to understand how much capital she might raise via a rights issue and the effects of such a rights issue; Institutional investor seeking to attend a roadshow for an upcoming securitisation deal; Same investor seeking to switch his exposure in mortgage securitisation to exposure in auto securitisation; CFO of the same investment company seeking to raise capital in the private placement market. Collaboration is Key – we serve clients best when we leverage the breadth of our franchise RBS00000 12 Questions? RBS00000 13

This material is issued by The Royal Bank of Scotland plc (“RBS”) and is intended to provide the recipient (the “Recipient”) with a summary of potential transaction structures and terms and conditions that may or may not lead to transactions being entered into between RBS and the Recipient. Unless and until both RBS and the Recipient agree to, and sign formal written contracts, it is not intended that either RBS or the Recipient is, or will be, bound by any of these proposed terms and conditions. This material is confidential and is intended for use only by the Recipient and its professional advisers and remains the property of RBS. It should not be reproduced or disclosed to any other person without the consent of RBS and must be returned on request to RBS and any copies thereof destroyed.

Nothing in this document should be construed as legal, tax, regulatory, accounting or investment advice or as a recommendation or an offer by RBS to purchase securities from or sell securities to the Recipient, or to underwrite securities of the Recipient, or to extend any credit or like facilities to the Recipient, or to conduct any such activity on behalf of the Recipient. RBS makes no representations or warranties with respect to the material, and disclaims all liability for any use the Recipient or its advisers make of the contents of the material. However this shall not restrict, exclude, or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not lawfully be disclaimed.

Any views or opinions expressed in the material (including statements or forecasts) constitute the judgement of RBS as of the date indicated and are subject to change without notice. RBS does not undertake to update this document. The Recipient should not rely on any representations or undertakings inconsistent with the above paragraphs. RBS is authorised and regulated in the UK by the Financial Services Authority. The Royal Bank of Scotland plc acts in certain jurisdictions as the authorised agent of The Royal Bank of Scotland N. V. The Royal Bank of Scotland plc. Registered in Scotland No. 90312. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. RBS00000 14