THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own ®nancial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent ®nancial adviser duly authorised under the Financial Services Act 1986 if you are resident in the United Kingdom, or, if not, from another appropriately authorised independent ®nancial adviser. This document is being sent for information only to option holders. If you have sold or otherwise transferred or sell or otherwise transfer on or before 20 June 2000 all your Ordinary Shares, 11% Cumulative Preference Shares or 51¤2% Cumulative Preference Shares, please forward this document and the accompanying documents immediately to the purchaser or transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you sell your Ordinary Shares prior to 20 June 2000 and are not on the register of members as at that date, any Selling Facility Form returned by you will be of no effect. Your attention is drawn to the letter from the Chairman of The Royal Bank of Scotland Group plc set out in Part 1 of this document, which contains a recommendation by your Board to vote in favour of the resolutions to be proposed at the Extraordinary General Meeting referred to below. The Royal Bank of Scotland Group plc (incorporated in Scotland under the Companies Acts 1948 to 1980 with registered number 45551) CIRCULAR TO SHAREHOLDERS and Notice of Extraordinary General Meeting Notice of an Extraordinary General Meeting of The Royal Bank of Scotland Group plc to be held at 11.00 a.m. on 20 June 2000 at the Balmoral Hotel, Princes Street, Edinburgh, is set out as Part 8 of this document. Holders of Ordinary Shares, 11% Cumulative Preference Shares and 51¤2% Cumulative Preference Shares are asked to complete and return the enclosed Form of Proxy in accordance with the instructions printed thereon as soon as possible, and in any event so as to be received by The Royal Bank of Scotland Group plc's Registrar, Computershare Services PLC, PO Box 858, The Pavilions, Bristol BS99 5WE, by not later than 11.00 a.m. on 18 June 2000. Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services Act 1986 (the ``UK Listing Authority'') for the Additional Value Shares to be admitted to the of®cial list of the UK Listing Authority (the ``Of®cial List'') and to the London Stock Exchange for such shares to be admitted to trading on the London Stock Exchange's market for listed securities. Admission to the Of®cial List together with admission to trading on the London Stock Exchange's market for listed securities constitute of®cial listing on a stock exchange. The Additional Value Shares will only be made available to Ordinary Shareholders and, other than pursuant to the Selling Facility, will not be generally made available or marketed to the public in the United Kingdom or elsewhere. Goldman Sachs International, Merrill Lynch International and UBS AG, acting through its ®nancial services group UBS Warburg, each of which is regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting for The Royal Bank of Scotland Group plc and no one else in connection with the issue of Additional Value Shares and the Selling Facility and will not be responsible to anyone other than The Royal Bank of Scotland Group plc for providing the protections afforded to their respective customers nor for providing advice in relation to such issue or any other matter referred to in this document. CONTENTS Part 1 Letter from the Chairman 3 Part 2 Additional Information 9 Part 3 Description of Additional Value Shares 13 Part 4 Taxation 18 Part 5 Option 2000 and the Employee Share Ownership Plan 22 Part 6 Pro Forma Unaudited Results (excluding NatWest) for the six months ended 31 March 2000 26 Part 7 Group Unaudited Pro Forma Combined Financial Information for the year ended 31 December 1999 (including NatWest) 31 Part 8 Notice of Extraordinary General Meeting 39 Part 9 Rights and Restrictions of Additional Value Shares 44 De®nitions 51 EXPECTED TIMETABLE OF PRINCIPAL EVENTS 2000 Last time and date for lodging Forms of Proxy for the Extraordinary General Meeting 11.00 a.m. on 18 June Latest time and date for lodging Selling Facility Forms 11.00 a.m. on 18 June Extraordinary General Meeting 11.00 a.m. on 20 June Record date for determining entitlement to Additional Value Shares 5.00 p.m. on 20 June Announcement of Selling Price(1)(2) 5 July Admission and trading of Additional Value Shares commences(1) (2) 8.00 a.m. on 12 July Despatch of cheques for proceeds of Additional Value Shares sold through 12 July the Selling Facility(1) (2) Despatch of share certi®cates for Additional Value Shares(1) (2) 12 July Additional Value Shares and proceeds of Additional Value Shares sold 12 July through Selling Facility credited to CREST accounts(1) (2) Notes: (1) The timing of events will be dictated by the bookbuilding process. The indicated dates represent the currently expected latest date. If any of the above times or dates should change, the revised times and/or dates will be noti®ed by an announcement through the Regulatory News Service of the London Stock Exchange. (2) All events in the above timetable following the Extraordinary General Meeting are conditional on the passing of the relevant resolutions at the Extraordinary General Meeting and Admission and, if applicable, completion of the Selling Facility. IF YOU WISH TO SELL YOUR ADDITIONAL VALUE SHARES PURSUANT TO THE SELLING FACILITY YOU MUST SEND YOUR COMPLETED SELLING FACILITY FORM SO AS TO BE RECEIVED BY COMPUTERSHARE SERVICES PLC AS SOON AS POSSIBLE, AND IN ANY EVENT BY NO LATER THAN 11.00 A.M. ON 18 JUNE 2000. PLEASE NOTE THAT THE SELLING FACILITY WILL BE SUBJECT TO CERTAIN CONDITIONS AS MORE PARTICULARLY DESCRIBED IN PARAGRAPH 3 OF PART 2 OF THIS DOCUMENT. PART 1: LETTER FROM THE CHAIRMAN The Royal Bank of Scotland Group plc The Rt Hon Viscount Younger of Leckie K.T. K.C.V.O. T.D. D.L. Chairman 23 May 2000 To ordinary and cumulative preference shareholders (and, for information only, to share option holders). In the Key Information Sheet dated 31 January 2000 issued in connection with the increased offer for NatWest, RBS announced its intention to issue Additional Value Shares to all shareholders in RBS in the event the offer was successful. This letter provides details of the proposals which the Company is making in relation to the issue of the Additional Value Shares, for which your approval will be sought at an Extraordinary General Meeting to be held on 20 June 2000. Notice of the Extraordinary General Meeting is set out in Part 8 of this document. Your approval will also be sought for proposals in relation to the Group's share and share option schemes and in relation to technical infringements of the Companies Act 1985 in respect of the payment of interim dividends in 1998 and 1999 on the Ordinary Shares and the payment of certain dividends on the Company's preference shares. Further details in respect of these proposals are set out later in this document. Progress with Integration of the NatWest Group As you will no doubt be aware, RBS's offer for NatWest was declared unconditional in all respects on 6 March 2000 and all shares in NatWest have now been acquired. RBS's management is in the process of implementing the various initiatives that were identi®ed during the course of the offer and believes that these will assist in the creation of a pre-eminent banking group in Europe. Implementation of Key Objectives All of the key objectives which were identi®ed and set down for the ®rst 30 days of the integration have now been completed. These include: c the formation of a new business architecture for the Group; c con®rming all key appointments and responsibilities; c aligning the internal control structure; and c the ®nalisation of a detailed three year operating plan for the Group. Disposals In the offer documentation relating to the acquisition of NatWest, RBS explained that it would carry out a detailed review of the NatWest Group to ascertain whether or not the Group would bene®t from the retention or disposal of certain businesses. As a result of this review, RBS has now agreed, subject to regulatory approvals, to sell Gartmore to Nationwide Mutual Insurance Company of Ohio for approximately £1.03 billion. It is anticipated that this sale will be completed by the end of June 2000. RBS has also agreed, subject to regulatory approvals, to the sale of Ulster Bank Investment Management Limited to KBC Group of Belgium and is currently proceeding with the disposal of the investment portfolios of NatWest Equity Partners. It has been decided that the US operations of Greenwich NatWest will be retained. 42 St Andrew Square Edinburgh EH2 2YE Telephone: 0131-556 8555 Registered in Scotland No. 45551 Registered Of®ce: 36 St Andrew Square Edinburgh EH2 2YB 3 Pro Forma Results I am pleased to con®rm that the pro forma results of the Group for the six months ended 31 March 2000 (excluding the results of the NatWest Group since its acquisition by RBS on 6 March 2000), have exceeded the forecast results published on 28 January 2000.