Annual Report
and Accounts 2007

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• Presentation of information
• Forward–looking statements
• Description of business
• Competition
• Risk factors
• Financial highlights
• Summary consolidated income statement
• Analysis of results
• Divisional performance
  • Corporate Markets
  • Retail Markets
  • Ulster Bank
  • Citizens
  • RBS Insurance
  • Manufacturing
  • Central items
  • Employee numbers at 31 December
• Consolidated balance sheet
• Cash flow
• Capital resources
• Risk and capital management

Central items

2007 compared with 2006

Central costs were substantially lower, reflecting in part the gains realised on a number of planned disposals that formed part of the Group's funding arrangements for the acquisition of ABN AMRO. These gains contributed to a reduction of £717 million in funding and corporate costs, which also benefited from a reduction of £152 million in the carrying value of our own debt accounted for at fair value and the receipt of a dividend on our investment in Bank of China. These benefits were partially offset by goodwill payments amounting to £119 million in respect of current account administration fees. Excluding realised gains totalling £475 million, funding and corporate costs were £620 million, 28% lower than in 2006.

Departmental and other costs increased by 4% to £461 million. This largely reflects the centralisation of certain functions and increased regulatory requirements.

2006 compared with 2005

Total central items decreased by 3% to £1,447 million.

Funding and corporate costs were 9% lower at £862 million, largely reflecting a year on year reduction of £41 million in IFRS-related volatility. The Group hedges its economic risks, and volatility attributable to derivatives in economic hedges that do not meet the criteria in IFRS for hedge accounting is transferred to the Group's central treasury function.

Departmental and other costs were 10% higher at £442 million largely attributable to additional pension costs and higher securitisation costs.