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A deeply discounted security ('DDS') is one which, under the terms of issue, is capable of yielding a deep discount on maturity or other form of redemption. This is determined by a formula. There is a deep discount if the amount payable on redemption exceeds the issue price by more than—

where¹:

1. Ìý

   ÌýÌýÌýÌý A is the amount payable on redemption, excluding interest payable at the time of redemption

2. Ìý

   ÌýÌýÌýÌý Y is the number of years in the redemption period (not exceeding 30). If the redemption period is not a complete number of years, each complete month or part of a month is treated as 1/12 of a year.

The security may be within or outside the United Kingdom².

The redemption period is the period between the date of issue and the date of redemption³.

Example

Alpha plc issues a bond on 1 July 2012 for £9,000 which is due for redemption on 31 December 2022 for £10,000. The redemption period is 10½