Fifth anniversary of the SIP 2013 FREE SHARES OFFER

Why is the fifth anniversary of the Share Incentive Plan (SIP) 2013 Free Shares Offer important?............................................................................................... 04

Selling your SIP 2013 Free Shares tax-free if you want to ......................................... 07

How to pre-elect to sell your SIP 2013 Free Shares tax-free at the first opportunity ................................................................................................................ 12

How to sell your SIP 2013 Free Shares after the pre-election period ends ........... 14

Important information about your SIP 2015 Free Shares ........................................... 18

Frequently asked questions .................................................................................................. 21

Jargon buster ........................................................................................................................... 25

Contacts ..................................................................................................................................... 26

Terms in bold are defined in the jargon buster.

Contents

Guide to the fifth anniversary of the SIP 2013 Free Shares Offer 3

When Royal Mail was privatised in October 2013, 100 million of the Company’s shares were set aside as Free Shares for eligible employees. This was the largest free stake of any major UK privatisation. Since then, Government has given more Free Shares to employees. In total, 12 per cent of the Company has been given to eligible employees since privatisation over four separate awards.

The value of a full-time employee’s Free Shares at privatisation exceeded the HMRC annual limit at the time of £3,000. So, the Free Shares were issued in two allocations, known as the SIP 2013 Free Shares Offer (613 shares awarded on 15 October 2013) and the SIP 2014 Free Shares Offer (116 shares awarded on 9 April 2014). Two further Free Shares awards were made, in 2015 (103 shares awarded on 5 October 2015) and in 2016 (81 shares awarded on 6 October 2016).

On 15 October 2018, it will be five years since the SIP 2013 Free Shares were given to eligible employees. The five year anniversary marks the first point at which you can sell your SIP 2013 Free Shares tax-free. The five year anniversary of the SIP 2014 allocation will follow next year on 9 April 2019.

While you are a Royal Mail employee, you do not have to sell your shares. You can continue to hold them in the SIP for as

long as you are an employee of the Company and continue to realise the benefits of being a shareholder. Shares that have reached their five year anniversary can be sold tax-free at any time, and, providing they are sold directly from the SIP, they will also remain Capital Gains Tax (CGT) free.

Full-time employees who were eligible for all the SIP Free Shares allocations and have held on to their 913 SIP Free Shares, have received around £863 in dividends since privatisation.

Note: if Royal Mail chooses to pay shareholders an interim dividend for 2018-19, you would only receive this on your SIP 2013 Free Shares if you still hold them on the record date. The record date is likely to be around the start of December 2018.

This booklet explains the options available to you and the factors you need to be aware of when deciding whether to hold or sell your Free Shares, including:

• The pre-election period to sell SIP 2013 Free Shares tax-free from the first available opportunity.

• The process used for SIP 2013 Free Shares sell-requests made from 15 October 2018 until real time dealing is switched back on.

Why is the fifth anniversary of the Share Incentive Plan (SIP) 2013 Free Shares Offer important? Awarded Number of Free

Shares issued* Conditional (taxable)

from Available (tax-free)

from

SIP 2013 15 October 2013 613 15 October 2016 15 October 2018

SIP 2014 9 April 2014 116 9 April 2017 9 April 2019



You can see how many Free Shares you currently hold from each Free Shares award, and their status, on the Employee Share Plan (ESP) portal at www.royalmailemployeeshares.co.uk.

Remember:

The value of shares can go down as well as up. If you have any questions about what you should do with your shares, you should get independent advice from a suitably qualified and authorised independent financial adviser. The directors and employees of Royal Mail, Equiniti Share Plan Trustees Limited (‘Trustee’) and Equiniti Limited (‘Equiniti’), the Share Scheme administrator, are not authorised to provide independent tax or financial advice.

Important information: Keeping your Free Shares

If you want to keep your shares, you do not need to take any action. Your Free Shares will continue to be held in the SIP.

Under the SIP rules, you cannot sell your Free Shares until three years after they are given to you, except in certain circumstances.

If you sell your Free Shares between three and five years after you are given them, you will have to pay income tax and National Insurance Contributions (NICs) on them. These are called ‘conditional’ shares. For a basic rate tax payer, the tax payable on conditional shares is likely to

be 32 per cent (including income tax and NICs), subject to your personal circumstances.

After five years, you will not have to pay income tax or NICs on the Free Shares if you sell them. These are called ‘available’ shares.

This means you will normally be able to sell your Free Shares as follows:

*Based on awards to a full-time employee

Free Shares anniversaries

Guide to the fifth anniversary of the SIP 2013 Free Shares Offer 54 Guide to the fifth anniversary of the SIP 2013 Free Shares Offer

You can continue to sell your SIP 2013 Free Shares at any time (see the box on page 8 for more information about share dealing services during this period). Before 15 October 2018, you will pay income tax and NICs on them. From 15 October 2018, you can sell them tax-free. When and how you choose to sell your Free Shares will have an impact on:

• whether you are able to see the share price at which your shares will be sold and, as a result, whether you know exactly how much you will receive from the sale;

• the process used to sell your shares, the possibility of your shares being sold at a discount to the market price and the size of any discount;

• when your sale request will be acted on, and your shares sold on the stock market; and

• when you will receive the proceeds (cash) from selling your shares.

Selling your SIP 2013 Free Shares tax-free if you want to

Important information about selling your SIP 2013 Free Shares tax-free as soon as this option becomes available from 15 October 2018

There is a range of ways that Equiniti and the brokers could sell the shares that employees request to sell during the pre-election period. Depending on market conditions, and in the event that there is a very high number of sell requests in the period up to and from 15 October 2018, the process used could result in employees’ shares being sold at a discount to the prevailing share price at the time. The discount could potentially range from five to 10 per cent, and could be more than that.

Or, if the volume of sell requests is lower, but is still above normal trading volumes, a different process may be used. This could mean that the price you receive for your shares is at a discount to the average share price on the stock market over the period of time during which the shares are sold. Equiniti will use the process they believe is in the best interests of employees selling Free Shares, and of other shareholders.

Please note that the possibility of your shares being sold at a discount to market price, as well as the other considerations listed on the following pages, will also apply to any SIP 2014 or 2015 Free Shares that you request to sell during the period between 16:30 on Friday 12 October 2018 and real time dealing being reinstated.

See pages 7-10 for more information.

Our principles

The Company will put in place a sale process for SIP 2013 Free Shares that aims to:

1. Get employees the best possible price for their shares 2. Result in all employees selling at the same time getting the same price for their shares and having the same

opportunity to take part 3. Maintain an orderly market and help to reduce the potential for volatility in the Royal Mail share price

Managing the sale for employees who want to sell their sharesIt is impossible to know in advance how many employees will wish to hold their Free Shares or sell them tax-free as soon as they become available. It may be that there is very high demand to sell from 15 October 2018. On the other hand, this may not be the case. We are preparing for all possible outcomes.

WARNING: Important information about your SIP 2015 Free Shares

As well as the information contained in this booklet about your SIP 2013 Free Shares, you also need to be aware of the following important information about your SIP 2015 Free Shares.

Your SIP 2015 Free Shares will reach conditional (taxable) status on 5 October 2018. This means you will be able to sell them if you want to. However, it is important to note that these shares cannot be sold prior to your 2013 and 2014 allocation, due to the SIP rules. If you are thinking of selling them, you need to be aware of the following information. You should read this alongside the example on pages 18-19.

• As SIP 2015 Free Shares will still be classified as conditional until 5 October 2020, you will pay income tax and NICs if you sell them before that date.

• You cannot sell your SIP 2015 Free Shares before your SIP 2013 and 2014 allocation.

• As of 5 October 2018, your SIP 2013, 2014 and 2015 Free Shares will all have conditional status, meaning they can be sold but you will pay income tax and NICs. This is until 15 October 2018, when SIP 2013 Free Shares become available and can be sold tax-free. You cannot select which Free Shares you want to sell. Under the rules of the SIP, shares are sold on a first in, first out basis.

• So, if you attempt to sell any of your Free Shares before 15 October 2018 and you still hold your SIP 2013 Free Shares, then your SIP 2013 Free Shares will be sold first, then shares from your SIP 2014 Free Shares allocation next and then from your SIP 2015 Free Shares allocation (depending on how many of your conditional shares you have already sold). You will have to pay income tax and NICs on any Free Shares sold before 15 October 2018.

• This means that if you sell any conditional shares before 15 October 2018, when you come to sell more of your Free Shares, you will not have your full SIP 2013 Free Shares allocation left to sell.

• If you wish to sell all or some of your SIP 2013 Free Shares tax-free, you can only do this after 15 October 2018 (please note, you can pre-elect before this date for your SIP 2013 shares to be sold from 15 October 2018 – see below for details on the pre-election process). Your SIP 2014 and SIP 2015 Free Shares will become available to be sold tax-free at their fifth anniversary in 2019 and 2020 respectively.

• You may wish to seek independent financial advice before deciding whether, and when, to sell your shares.

Important information: Keeping your Free Shares

If you want to keep your shares, you do not need to take any action. Your Free Shares will continue to be held in the SIP.


Important information about dealing services during this period

• 23:59 on Thursday 20 September 2018 until 16:30 on Friday 12 October 2018: you will not be able to make sell-requests using the normal phone dealing service for anything other than the pre-election. Real time dealing and out of hours dealing will still be available via the ESP portal at www.royalmailemployeeshares.co.uk. However, if you are thinking of selling any shares before 15 October 2018 via real time dealing and out of hours dealing during this period, you should read the information on pages 18-19 before making a decision. Please note, employees selling any shares before 15 October 2018 will pay income tax and NICs and will reduce any balance of SIP 2013 Free Shares available to sell tax-free.

• From 16:30 on Friday 12 October until further notice: the online and phone dealing services will not be available for any Free Shares sell requests while Equiniti processes the volume of sale requests already received. We will inform you when they become available again.

• When online and phone dealing services become available again: both services are available 24 hours a day. During this time, your shares will not be sold in real time. This means you will not be able to see the share price at which your shares are sold until after they are sold. Following these services becoming available, it is possible that they could again be withdrawn temporarily, and we will inform you if that is the case.

• We will inform you when online real time dealing will be available: this will depend on the volumes of shares employees wish to sell. There is no certainty on when real time dealing will be reinstated, and it could be subsequently withdrawn depending on demand. We will keep you informed about when real time dealing becomes available via the ESP portal, phone service and Royal Mail internal communications channels.

It may be that the demand to sell SIP 2013 Free Shares from 15 October 2018 means that there are more requests to sell Royal Mail shares than can be processed in an orderly way using our usual process. The process used will depend on the volume of sale requests made and market conditions at the time.

After the pre-election period closes, Equiniti and the brokers will review these market factors and decide which sale process best meets our principles (see the box on page 7). If any additional fees are required for the process (ontop of the usual commission fee that employees need to pay each time they sell their shares), these will be paid by Royal Mail. The cost would not be passed on to employees.

Please note that the possibility of your shares being sold at a discount to market price, as well as the other considerations listed below, will also apply to any SIP 2014 or 2015 Free Shares that you request to sell during the period between 16:30 on Friday 12 October 2018 and real time dealing being reinstated.

There is a range of ways that Equiniti and the brokers could sell the shares that employees request to sell during the pre-election period. Depending on market conditions, and in the event that there is a very high number of sell requests in the period up to and from 15 October 2018, the process used could result in employees’ shares being sold at a discount to the prevailing share price at the time. The discount could potentially range from five to 10 per cent, and could be more than that.

Or, if the volume of sell requests is lower, but is still above normal trading volumes, a different process maybe used. This could mean that the price you receivefor your shares is at a discount to the average share price on the stock market over the period of time during which the shares are sold. Equiniti will use the process they believe is in the best interests of employees selling Free Shares, and of other shareholders.

To minimise market impact, Equiniti and the brokers may only be able to sell a certain number of shares each day. This would mean that the trade may take a few days or longer to complete, with settlement (when you receive your money) occurring a few days later. The period of time over which the shares may be sold will be affected by how many employees choose to take part in the pre-election period and prevailing market conditions.

Everyone who takes part in the pre-election period will sell their shares at the same price. Employees taking part in the pre-election will not know what that share price is until after the shares have been sold, as the shares will not be sold in real time. As a result, your shares could be sold at a pricethat is significantly lower than when you submitted yourpre-election. Once you have submitted your instruction, you will not be able to change your mind. It will be actedupon and your shares will be sold.

Once trading volumes return to normal, you will be able tosell your shares online in real time via the ESP portal atwww.royalmailemployeeshares.co.uk. We will keep you informed about when real time dealing becomes available via the ESP portal, helpline and Royal Mail internal communications channels.

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If there is high demand to sell shares, just like for any other listed company, this could impact the Royal Mail share price and therefore the sale price that people receive for their shares. The Company’s priority is putting in place a sale process which meets our principles outlined on the previous page.

In order to help meet our principles, there will be apre-election process. Employees will need to tell Equiniti in advance if they want to sell their SIP 2013 Free Shares

tax-free at the first available opportunity. Many company share schemes run pre-election periods to managesale requests when large share schemes mature. The pre-election period will run from 09:00 on Monday 24 September to 16:30 on Friday 12 October 2018. Just as in 2016 at the SIP 2013 third anniversary, in the period following 12 October 2018, online real time dealing will not be available (see the box below).


For employees who may want to sell any conditional shares between 24 September 2018 and 12 October 2018

Conditional shares are those Free Shares which have been held for more than three years but less than five years.If you choose to sell conditional shares, you pay income tax and NICs on them. There are important factors to be aware of – including the potential loss of tax benefits – when deciding whether you want to sell your shares, and when. You should read the information on pages 18-19.

The automated phone service will not be available after 23:59 on 20 September 2018 for the duration of this period for anything other than the pre-election for SIP 2013 Free Shares.

If employees wish to sell any of their conditional SIP 2013, 2014 or 2015 Free Shares during the pre-election period for 2013 Free Shares, they must do so via the ESP portal at www.royalmailemployeeshares.co.uk. This service will be available throughout the pre-election period, until 16:30 on 12 October 2018.

Please note, employees selling any shares before 15 October 2018 will pay income tax and NICs.

In summary: your options

Option Advantages Disadvantages

Hold your shares • Receive dividends if and when the Company decides to pay them.

• If the share price goes up and you then sell your shares, you get more cash from the sale.

• You can vote on certain matters by directing the Trustee on how to vote, on your behalf, at annual general meetings (AGMs) and other shareholder meetings.

• Companies do not have to pay dividends. How often and how much we pay will dependon many things. We have a progressive dividend policy (this means we will try to increase the dividend every year).

• If the share price goes down and you then sell your shares, you get less cash from the sale.

Request to sell your SIP 2013 shares during the pre-election period

• Shares will be sold tax-free as soon as that option becomes available after 15 October.

• You receive cash (net proceeds) from sellingyour shares.

• If there is a fall in the share price after the sale, this will not affect how much your shares are worth as you will have already sold them.

• You won’t know the price your shares will be sold at, and once you have submitted a request it cannot be cancelled.

• If there is high demand to sell, this could impact the share price and the sale price you receive. It could be at a discount to the prevailing share price at the time (see pages 7-9).

• You won’t know the process that will be usedto sell your shares.

• You won’t know the exact date your shares will be sold or when you will receive the net proceeds (cash).

• If there is a future increase in the share price after the sale, you won’t benefit from it.

• You won’t receive any dividends or have any voting rights after you have sold your shares.

Request to sell your shares after 15 October 2018, and before real time dealing is available

(Note: we cannot say how long this period will be. It will depend on the volume of sale requests and market conditions. For more information about dealing services in this period, seethe box on page 8)

• You will be able to take into account theRoyal Mail share price following thepre-election period.

• You will receive cash (net proceeds) from selling your shares.

• If there is a fall in the share price after the sale, this will not affect how much your shares are worth as you will have already sold them.

• You won’t know the price at which your shareswill be sold.

• If there is high demand to sell, this could impact the share price and the sale price you receive. It could be at a discount to the prevailing share price at the time (see pages 14-15).

• You won’t know the exact date your shares will be sold or when you will receive the net proceeds (cash).



Request to sell your shares when real time dealing is reinstated

(Note: when real time dealing becomes available will depend on the ongoing volume of sale requests received and market conditions)

• You can see the share price at which your shares will be sold (if selling online via the ESP portal).

• You will receive cash (net proceeds) from selling your shares, and you will know when you will receive it.

• If there is a fall in the share price after the sale, this won’t affect how much your shares are worth as you will have already sold them.



• There is no certainty on when real time dealing will be reinstated, and it could be subsequently withdrawn depending on demand.

Wait until April 2019 to decide whether to sell your SIP Free Shares

(Note: the sale processmay need to be similar tothat to be put in place for15 October 2018)

• You can sell SIP 2013 and SIP 2014 free shares together and pay one commission fee.

• If there is an increase in the share price between now and April 2019 before you sell your shares, you will benefit from that.

• Share prices can go down as well as up between October 2018 and April 2019.

• If there is a decrease in the share price between now and April 2019 before you sell your shares, this will reduce the amount you receive.


Example

In this example, the employee notes that the share price at close of the market on 12 October 2018 is 450p.

They have 613 SIP 2013 Free Shares. The implied value of the shares at the time of market close on 12 October 2018 will be:

613 (number of shares) x 450p = £2,758.50

As explained on pages 7-9, there is a range of ways that Equiniti and the brokers could sell the shares that employees request to sell during the pre-election period. Depending on market conditions, and in the event that there is a very high number of sell requests in the pre-election period, the process used could result in employees’ shares being sold at a

discount to the prevailing share price at the time. The discount could potentially range from five to 10 per cent, and could be more than that. Or, if the volume of sell requests is lower, but is still above normal trading volumes, a different process may be used. This could mean that the price you receive for your shares is at a discount to the average share price on the stock market that day. Equiniti will use the process they believe is in the best interests of employees selling Free Shares, and of other shareholders.

Whenever you sell shares, you pay a fee (commission) for selling the shares. Equiniti’s commission rate is 0.5% of the sale value or £17.50, whichever is higher. As the shares are being sold out of the SIP, no CGT is payable.

• Please note, you cannot submit pre-election requests online via the ESP portal. You can only submit your request via phone.

• When you call, you will need your payroll number, which can be found on your payslip, and your date of birth.

• At the end of the call, you will need to take a note of your reference number. Keep this number for future reference and if you have any questions.

• Your instruction will be repeated back to you and once you confirm your choices, your shares will be placed into the pre-election for sale from 15 October 2018.

• The automated Phone Pre-election Service will only be available between 09:00 on 24 September and 16:30 on 12 October 2018 to employees who wish to sell their SIP 2013 Free Shares tax-free at the first available opportunity.

• Sales instructions received during this time will be processed in accordance with HMRC rules and therefore the earliest awarded shares will be sold first.

• Equiniti will send a sales advice to your home address after your shares have been sold. This will show the number of shares you have sold, the share price at which you sold them, the date you sold them, and the net proceeds after the commission fee (0.5% of the sale value or £17.50, whichever is higher) has been deducted. If you have moved address recently, please ensure that Equiniti have your up-to-date contact details.

• Please read the Terms and Conditions on the ESP portal (www.royalmailemployeeshares.co.uk) before making a decision about whether to hold or sell your shares.

If you want to sell some or all of your SIP 2013 Free Shares tax-free at the first available opportunity you need to call the automated Phone Pre-election Service on 0800 012 12 13 during the three-week pre-election period.

This example demonstrates the process that may occur where an employee is participating in the pre-election sale from 15 October 2018 and a large volume of sale instructions are received.

If you want to sell your SIP 2013 Free Shares tax-free as soon as possible, you need to make a sell request beforehand, during the pre-election period. This runs from 09:00 on Monday 24 September to 16:30 on Friday 12 October 2018.

Please see pages 7-9 for more information on how the

sale will be managed for employees wishing to sell their SIP 2013 Free Shares tax-free as soon as this option becomes available.

Please note you will pay commission every time you sell your Free Shares.

Important note: Anyone who chooses to submit a request to sell some or all of their SIP 2013 Free Shares during the pre-election period will sell their shares at the same price. However, you will not know what that share price is until after the shares have been sold, as the shares will not be sold in real time. As a result, your shares could be sold at a price that is significantly lower than when you submitted your pre-election. Once you have submitted your instruction, you will not be able to change your mind. Your instruction will be acted upon and your shares will be sold.

How to pre-elect to sell your SIP 2013 Free Shares tax-free at the first opportunity

The example assumes the seller requests to sell their full SIP 2013 Free Shares allocation of 613 shares.

No Discount 5% Discount 10% Discount 20% Discount

Share price 450p 450p 450p 450p

Sell from 15 October via pre–election 450p 427.50p 405p 360p

Market value of 613 shares £2,758.50 £2,620.57 £2,482.65 £2,206.80

Amount of income tax, NICs and CGT £0 income tax£0 NICs £0 CGT

£0 income tax£0 NICs £0 CGT



Commission £17.50 £17.50 £17.50 £17.50

Proceeds from sale £2,741.00 £2,603.07 £2,465.15 £2,189.30

When will proceeds be received? Within six working days, once the sale has been completed (or longer if paid by cheque because Equiniti does not hold your bank account details)

The value of shares can go down as well as up. The example shown here, including the share price used, is for illustrative purposes only. It should not be used to make any financial decisions. If you have any questions about what you should do with your shares, you should get independent advice from a suitably qualified and authorised independent financial adviser. The directors and employees of Royal Mail, the Trustee, and Equiniti are not authorised to provide independent tax or financial advice. The money you will receive if you choose to sell your Free Shares will depend on the share price when you sell them. Every time you sell your Free Shares, you will pay a fee (commission). The commission rate is 0.5% or £17.50, whichever is higher.


How to sell your SIP 2013 Free Shares after the pre-election period ends

If you do not want to take part in the pre-election period but decide to sell your SIP 2013 Free Shares after that period and before real time dealing is turned on, you can submit your request:

• online at www.royalmailemployeeshares.co.uk or

• by phone, via the free automated telephone service on 0800 012 12 13.

Both services are available 24 hours a day, except for from 16:30 on 12 October 2018 until further notice. During this time the online and phone dealing services will not be available for any Free Shares sell requests, while Equiniti processes the volume of sales requests already received. We will inform you when they become available again. Following these services becoming available, it is possible that they could again be withdrawn temporarily, and we will inform you if that is the case.

You will not be able to sell your shares in real time. This means you will not be able to see the share price at which your shares are sold until after they are sold.

Equiniti will review the volume of sell requests with the brokers and decide on the most appropriate approach. The process used will depend upon market activity and the volume of sell requests received. Equiniti will use the process they believe is in the best interests of employees selling Free Shares, and of other shareholders. Shares will be sold in line with the principles outlined on page 7.

Depending on market conditions, and in the event that there is a very high number of sell requests in the period up to and from 15 October 2018, the process used could result in employees’ shares being sold at a discount to the prevailing share price at the time. The discount could potentially range from five to 10 per cent, and could be more than that.

Or, if the volume of sell requests is lower, but is still above normal trading volumes, a different process may be used. This could mean that the price you receive for your shares is at a discount to the average share price on the stock market over the period of time during which the shares are sold.

If this is the case, sell requests received from Monday 15 October 2018 will be grouped together and sold as a weekly batch (from 22 October 2018). Sell requests received from Monday 22 October 2018 may be sold in weekly or daily batches. Equiniti will try to sell the shares as one batch of sale requests at the best possible share price over the period in which the shares are sold.

Depending upon the volume of sell requests received, it may take several days to sell all of the shares within the batch. All employees selling in the same batch will receive the same share price.

A. If you submit your sell request after the pre-election period and before real time dealing is available

This section covers: A) If you submit your sell request after the pre-election period and before real time dealing is available B) If you submit your sell request once real time dealing is available C) From 9 April 2019 when your SIP 2014 Free Shares become available to sell tax-free

This example shows the process that may occur where an employee has submitted their sale instruction during the week beginning 15 October 2018. In this example, the sale instructions are grouped together and sold on a batched weekly basis.

Sale instruction submitted 16 October 2018

Share price This will be an average price once all shares within the batch are sold. If there is a large volume of sell requests, shares may be sold at a discount to the prevailing share price at the time.

When will my shares be sold? We only know that the sale of the shares will start on 22 October 2018. The time it takes will depend on the volume of shares to sell.

When will I know the price my shares are sold at? How?

We will only know the sale price once all of the shares within the batch have been sold. This process may take a few days to complete and employees will receive an average price.Sales advices will be sent out within five days after the sale has settled.

Market value of the shares The market value at the time you sell the shares may not reflect the proceeds you eventually receive as this will be driven by market activity. The market price of shares can fluctuate across the week and this will decide the eventual proceeds you will receive.

Commission £17.50 (or 0.5% of the sale value, whichever is higher).

When will I receive the proceeds? Within six working days once sale of the batch is completed (or longer if paid by cheque because Equiniti does not hold your bank account details).

The share price when your shares are sold may be significantly lower or higher than at the time you submitted your request, depending on market conditions and the volume of sell requests.

Once the sale has been completed, proceeds will be sent to your designated bank account within six working days (or longer if paid by cheque because Equiniti does not hold your bank account details).

This will continue until real time dealing is made available.

Submitting your sell request from 15 October 2018 until real time dealing is made available:

• If you submit your sell request by phone, you will need your payroll number, which you can find on your payslip,

and date of birth. At the end of the call, you will need to take a note of your reference number. Keep this number for future reference and if you have any questions.

• Where you submit your request online, you will receive an acknowledgement email. Details of all your transactions are also available via the ESP portal. Equiniti will send a sales advice to your home address after your shares have been sold. This will show the number of shares you have sold, the share price at which you sold them, the date you sold them, and the net proceeds after the commission fee has been deducted. If you have moved address recently, please ensure that Equiniti have your up-to-date contact details.

The value of shares can go down as well as up. The example shown above is for illustrative purposes only. It should not be used to make any financial decisions. If you have any questions about what you should do with your shares, you should get independent advice from a suitably qualified and authorised independent financial adviser. The directors and employees of Royal Mail, the Trustee and Equiniti are not authorised to provide independent tax or financial advice. The money you will receive if you choose to sell your Free Shares will depend on the share price when you sell them. Every time you sell your Free Shares, you will pay a fee (commission). The commission rate is 0.5% of the sale value or £17.50, whichever is higher.

Example


B. If you submit your sell request once real time dealing is available

If you wish to have greater control of when your shares will be sold and see what price they will be sold at, you will need to wait until real time dealing is made available. This will depend on market activity and the volume of sale instructions received. Please note that if we experience a significant increase in sell requests after real time dealing is made available, Equiniti and the brokers may have to suspend real time dealing for a period. They would do this to help ensure we can meet the principles of the sale process outlined on page 7.

You can find out when real time dealing is available by checking the ESP portal, calling the phone service or through the Royal Mail internal communications channels.

Online Once real time dealing is made available again, you can sell your SIP 2013 Free Shares in real time online via the ESP portal (www.royalmailemployeeshares.co.uk) when the stock market is open (08:00 to 16:30). You will get a quote based on the current share price, before you commit to selling your shares. This means you will have certainty of the share price at which your shares will be sold and when you will receive your sale proceeds. This is typically six working days after submitting your instruction.

Once you have logged into your account, you will be given the option to select ‘Real Time SIP Sales’ or ‘SIP Sales’ from the ‘I want to’ menu on the right-hand side of the page. You will be able to select ‘Real Time SIP Sales’ if you are selling your shares when the stock market is open. You will be able to select ‘SIP Sales’ if you are selling your shares when the stock market is closed.

PhoneYou can choose to sell your SIP 2013 Free Shares via the free automated telephone service. Please note, if you do this your shares will be sold during the next working day, based on a share price that will be determined on the day.

The automated telephone service is available 24 hours a day. Call 0800 012 12 13 and follow the instructions.

• You will need your payroll number, which you can find on your payslip, and date of birth when you call.

• At the end of the call, you will need to take a note of your reference number. Keep this number for future reference and if you have any questions.

Example When real time dealing becomes available will depend on the ongoing volume of sell requests received and market conditions. We expect that it may take a few weeks after 15 October 2018 for volumes to settle, and may be longer.

These examples show the process that will occur where an employee submits a sell request when real time dealing is available. Please note, the date of 5 November 2018 is for illustrative purposes only. Real time dealing may become available before or after this date.

Sell request submitted online via the ESP portal when the stock market is open (08:00 – 16:30)

Sell request submitted via the phone service any time or via the ESP portal when the stock market is closed

Sale instruction submitted 5 November 2018 at 11:30 5 November 2018 at 18:00

Share price As displayed on the ESP portal Not known until sold on the following day

When will my shares be sold? 5 November 2018 at 11:30 6 November 2018 (before market close)

Market value of the shares The share price you receive will reflect the market price at the time of sale.

When will I know the price my shares are sold at? How?

The ESP portal will present a share price which you then have a few seconds to accept. Once you submit your instruction, you will receive confirmation of the price you have received.

You will receive a sales advice showing the share price within 3-4 days of settlement.

Commission £17.50 (or 0.5% of the sale value, whichever is higher).

When will I receive the proceeds? Within six working days of submitting your instruction (or longer if paid by cheque because Equiniti does not hold your bank account details).

The value of shares can go down as well as up. The example shown above is for illustrative purposes only. It should not be used to make any financial decisions. If you have any questions about what you should do with your shares, you should get independent advice from a suitably qualified and authorised independent financial adviser. The directors and employees of Royal Mail, the Trustee and Equiniti are not authorised to provide independent tax or financial advice. The money you will receive if you choose to sell your Free Shares will depend on the share price when you sell them. Every time you sell your Free Shares, you will pay a fee (commission). The commission rate is 0.5% or £17.50, whichever is higher.

Remember:

The value of shares can go down as well as up. You may want to get independent financial advice. Royal Mail, the Trustee and Equiniti cannot provide this.

C. From 9 April 2019 when your SIP 2014 Free Shares become available to sell tax-free

Your SIP 2014 Free Shares become available to sell tax-free from 9 April 2019. If you sell your SIP 2013 and 2014 Free Shares together at this point, you will pay one dealing fee (commission).


Important information about your SIP 2015 Free Shares

As well as the information you have read about your SIP 2013 Free Shares, you also need to be aware of the following important information about your SIP 2015 Free Shares.

Your SIP 2015 Free Shares will reach conditional (taxable) status on 5 October 2018, the same status as any SIP 2013 and 2014 Free Shares that you currently own. This means you will be able to sell some or all of your SIP 2015 Free Shares, if you want to. However, it is important to note that these shares cannot be sold prior to your 2013 and 2014 allocation, due to the SIP rules. If you are thinking of selling them, you need to be aware of the following information. You should also read the example on the next page.

• As your SIP 2015 Free Shares will still be classified as conditional until 5 October 2020, you will pay income tax and NICs if you sell them before that date.

• You cannot sell your SIP 2015 Free Shares before your SIP 2013 and 2014 allocation.

• As of 5 October 2018, your SIP 2013, 2014 and 2015 Free Shares will all have conditional status, meaning they can be sold but you will pay income tax and NICs. This is until 15 October 2018, when SIP 2013 Free Shares become available and can be sold tax-free. You cannot select which Free Shares you want to sell. Under the rules of the SIP, shares are sold on a first in, first out basis.

• So, if you attempt to sell any of your Free Shares before 15 October 2018 and you still hold your SIP 2013 Free Shares, then your SIP 2013 Free Shares will be sold first, then shares from your SIP 2014 Free Shares allocation next and then from your SIP 2015 Free Shares allocation (depending on how many of your conditional shares you have already sold). You will have to pay income tax and NICs on any Free Shares sold before 15 October 2018.

• This means that if you sell any conditional shares before 15 October 2018, when you come to sell more of your Free Shares, you will not have your full SIP 2013 Free Shares allocation left to sell.

• If you wish to sell all or some of your SIP 2013 Free Shares tax-free, you can only do this after 15 October 2018 (please note, you can pre-elect before this date for your SIP 2013 shares to be sold from 15 October 2018 – see pages 7-13 for details on the pre-election process). Your SIP 2014 and SIP 2015 Free Shares will become available to be sold tax-free at their fifth anniversary in 2019 and 2020 respectively.

• You may wish to seek independent financial advice before deciding whether, and when, to sell your shares.

The value of shares can go down as well as up. The example shown on the next page, including the share price used, is for illustrative purposes only. It should not be used to make any financial decisions. If you have any questions about what you should do with your shares, you should get independent financial advice. The directors and employees of Royal Mail, the Trustee and Equiniti are not authorised to provide independent tax or financial advice. The money you will receive if you choose to sell your Free Shares will depend on the share price when you sell them. Every time you sell your Free Shares, you will pay a fee (commission). The commission rate is 0.5% or £17.50, whichever is higher.

In this example, you are a full-time employee with the full allocation of SIP 2013, 2014 and 2015 Free Shares and you are thinking of selling your SIP 2013 Free Shares from 15 October 2018 when they become available to sell tax-free. On 5 October 2018, you think you also want to sell your 103 newly conditional SIP 2015 Free Shares. If you go ahead, you would sell any SIP 2013 Free Shares you had ahead of any SIP 2015 Free Shares, and this is what would happen (please note, the share price used here is for illustrative purposes only).

You sell 103 conditional shares on 5 October 2018:

If you then decide to sell 613 shares from 15 October 2018, you would only have 510 available to sell tax-free, as you have already sold 103 of your oldest (i.e. SIP 2013) Free Shares. This illustration shows how your proceeds would be affected if you sell from 15 October 2018:

Total number of conditional shares you can sell (SIP 2013, 2014 and 2015 full allocation) 832

Number of conditional shares you decide to sell (equivalent to SIP 2015 Free Shares award) 103

Share price on the day of sale 450p

Market value £463.50

Income tax and NICs £148.32*

Commission £17.50

Net proceeds £297.68

*Based on a basic rate tax payer, paying 20 per cent tax and 12 per cent NICs

*Based on a basic rate tax payer, paying 20 per cent tax and 12 per cent NICs

Number of shares you decide to sell 613

Available (tax-free) Conditional (taxable)(sale already made on 5 October 2018)

Shares sold 510 103

Share price 450p 450p

Market value £2,295.00 £463.50

Income tax and NICs 0 £148.32*

Net proceeds £2,295.00 £315.18

Commission £17.50

Total proceeds £2,592.68

When you receive you proceeds Within six days of share sale, directly to your bank account

Via your next available payroll

This example assumes the share price remains constant. But remember, share prices can go down or up. The price you get for selling your shares on any future date cannot be guaranteed.

Example


Questions:

If you have any questions about your Free Shares, or the content of this booklet, you can call the Employee Shares Helpline free on 0800 012 12 13. You can also chat live to a share expert online using Live Chat. You can access Live Chat at www.myroyalmail.com/employee-share-offers. Both Live Chat and the helpline are open 08:30 to 17:30, Monday to Friday (not including UK bank holidays).

Frequently asked questions

1. Why do share prices go up and down?The price of a company’s shares may go up or down depending on the demand for the shares. This can be influenced by many things, including the company’s performance. If investors want to buy shares in the company, the increase in demand may increase the share price. The share price does not always go up if a company does well.

2. I don’t want to sell my Free Shares. Can I keep them in the SIP indefinitely? If you want to keep your shares, you do not need to take any action. Your Free Shares will continue to be held in the SIP for as long as you are a Royal Mail employee.

You may have to take your Free Shares out of the SIP in certain circumstances, for example if you leave Royal Mail or there is a takeover of Royal Mail. The Trustee will contact you if you have to take your Free Shares out of the SIP.

3. Why might my shares be sold at a discount to the prevailing share price at the time?If there is high demand to sell shares, just like for any other listed company, this could impact the Royal Mail share price and therefore the sale price that people receive for their shares. Equiniti will review the volume of sell requests with the brokers and decide on the most appropriate approach. The process used will depend upon market activity and the volume of sell requests received and may take a few days or longer to complete. Equiniti will use the process they believe is in the best interests of employees selling Free Shares, and of other shareholders.

The Company’s priority is putting in place a sale process which aims to meet our principles. These are: 1) getting employees who wish to sell their shares the best possible

price; 2) result in all employees selling at the same time getting the same price for their shares and having the same opportunity to take part; and 3) maintaining an orderly market and helping reduce the potential for volatility in the Royal Mail share price.

4. How do I avoid selling my shares at a discount?If you want certainty that your shares will not be sold at a discount to the prevailing share price at the time, you will need to use real time dealing when it is available.

When real time dealing becomes available after 15 October 2018 will depend on market activity and the volume of sell requests received. This could take many weeks in the event of high volumes. Please note, you will pay commission every time you sell some Free Shares. This is 0.5% of the sale value or £17.50, whichever is higher.

5. What if I’ve already sold some of my SIP 2013 Free Shares?If you have already sold some of your SIP 2013 Free Shares, from 15 October 2018 you will be free to sell the remaining SIP 2013 Free Shares free from income tax or NICs as they will be classed as available shares.

6. Can I sell some of my Free Shares and keep the rest? Yes, you may choose to hold some, or all of your SIP 2013 Free Shares, or you can choose to sell them.

Any Free Shares you don’t sell will remain in the SIP. You will pay commission every time you sell some Free Shares. This is 0.5% of the sale value or £17.50, whichever is higher.


Frequently asked questions (continued)

7. Can I sell my SIP 2013 Free Shares whenever I like?Yes. If you sell them before 15 October 2018 you will pay income tax and NICs on them. When the shares have reached their fifth anniversary, you can sell them whenever you like, subject to the sale processes outlined in this booklet. As the shares will be available after the fifth anniversary, this will mean that the proceeds are not subject to income tax or NICs. Equiniti will send the proceeds from any sale directly to your bank account (or by cheque to your home address, if your bank details are not held). If you have moved address recently, please ensure that Equiniti has your up-to-date contact details.

8. Can I sell my SIP 2015 Free Shares whenever I like after 5 October 2018?For the vast majority of current employees, once you have held your SIP 2015 Free Shares for at least three years, you can sell them at any time. However, if you sell them before you have held them for five years (i.e. 5 October 2020), you need to pay income tax and NICs on the value of the shares. If you hold SIP 2013 and 2014 shares too, you should read pages 18-19 of this booklet before you make a decision.

9. Will Royal Mail have to pay extra to run the pre-election period? Will this affect the share price I get for selling my Free Shares?There are no additional costs associated with making the pre-election available to employees. It may be that the demand to sell SIP 2013 Free Shares from 15 October 2018 means that there are more requests to sell Royal Mail shares than can be processed in an orderly way using our usual processes. The process used could therefore incur additional fees. This will depend on the volume of sale requests made and market conditions at the time. After the pre-election period closes, Equiniti and the brokers will review these factors and decide which sale process best meets our principles (see page 7). If any additional fees are required for the process (on top of the usual commission fee that employees need to pay each time they sell their shares), these will

be paid by Royal Mail. The cost would not be passed on to employees.

10. I want to sell my conditional shares but the phone service is not available. What should I do?From 23:59 on 20 September 2018 until 09:00 on 15 October 2018, you will not be able to make sell-requests using the normal phone dealing service for anything other than the pre-election. Real time dealing and out of hours dealing will still be available via the ESP portal at www.royalmailemployeeshares.co.uk until 16:30 on 12 October 2018. However, if you are thinking of selling any shares before 15 October 2018, you should read the information on pages 18-19 before making a decision. Please note, employees selling any shares before 15 October 2018 will pay income tax and NICs.

From 16:30 on 12 October 2018, the online real time dealing service will not be available until further notice. This is to manage the sale of SIP 2013 Free Shares. Please see page 8 for more details on the revised schedule. We are putting in place a sales process for SIP 2013 Free Shares which aims to meet the principles outlined on page 7.

11. How will I receive the money from selling my available SIP 2013 Free Shares? When you sell your available Free Shares, the proceeds will be sent direct to your bank account, or by cheque, if Equiniti does not hold your bank account details.

12. When will I receive the money from selling my SIP 2013 Free Shares?This will depend on when you sell your shares. Requests submitted in the pre-election period and before real time dealing is made available will take longer to reach bank accounts as the shares will not be sold in real time and may take several days to be sold. Once the sale has been completed, you will receive the proceeds within six working days (or longer if paid by cheque because Equiniti does not hold your bank account details).

If you wait for real time dealing to become available, settlement will occur around two days after your instruction is received and therefore proceeds should be received within six working days after you submit your instruction (or longer if paid by cheque because Equiniti does not hold your bank account details). It may take a day or so longer for any transactions processed via the automated phone service or via the out of hours dealing service on the ESP portal. Please see pages 16-17 for more details.

13. How can I find out the share price at the time I want to sell my Free Shares?If you choose to take part in the pre-election period, or choose to sell your shares before real time dealing is made available again, you will not be able to see the share price at which your Free Shares have been sold until after they are sold. As a result, your shares could be sold at a price that is significantly lower than when you submitted your sell request. Once you have submitted your instruction, you will not be able to change your mind. It will be acted upon and your shares will be sold.

Everyone who sells their shares using the pre-election process will receive the same price for their shares. Everyone selling in weekly and daily batch sales will sell their Free Shares at the same share price as those selling in the same weekly or daily batch.

Once real time dealing is made available, if you choose to sell your Free Shares online when the stock market is open, the share price will be displayed and you will also be able to get a quote based on the current share price before you confirm that you want to sell your Free Shares. You will have 15 seconds to accept your quote and sell your shares. If you do not accept in this time, you can ask for a new quote, and you will then have another 15 seconds in which to accept it and sell your shares.

14. What documents will I receive when I sell my shares?Equiniti will send a sales advice to your home address after your shares have been sold. This will show the number of shares you have sold, the share price at which you sold them, the date you sold them, the gross proceeds before income tax and NICs (if applicable), and the net proceeds after income tax, NICs (if applicable) and the commission fee have been deducted. If you have moved address recently, please ensure that Equiniti has your up-to-date contact details.

You should receive your sales advice within six working days after your shares have been sold (or longer if paid by cheque because Equiniti does not hold your bank account details).

15. Do I have to use the methods shown in this booklet to sell my Free Shares? Yes, as the shares are held in a SIP, they may only be sold through the methods described in this booklet.

16. Are there charges if I want to sell my shares? You will pay a fee (known as commission) every time you sell any Free Shares. Equiniti’s commission rate is 0.5% of the sale value or £17.50, whichever is higher. So, if you sell your Free Shares in two lots, you will pay a total of 0.5% of the sale value or £35 (whichever is higher) in commission.

17. When will you turn real time dealing back on?Real time dealing will only be available when volumes return to normal. This could take many weeks. You can find out when real time dealing is available by checking the ESP portal, calling the helpline or through the Royal Mail internal communications channels.

Frequently asked questions (continued)


18. What happens if I leave Royal Mail before I sell my Free Shares? If you leave Royal Mail and have held your Free Shares for three years, you will be allowed to keep the shares, but they will need to come out of the SIP. You may have to pay income tax and NICs on their value, depending on the reason you left Royal Mail (see question below).

19. Under what circumstances would I not have to pay income tax and NICs on the Free Shares if I sold them before the fifth anniversary of being given them?Under the rules of the SIP, the only time you would not have to pay income tax or NICS on shares that have been in the SIP for less than five years is if you leave Royal Mail for the following reasons:• You have an injury or disability which means you can

no longer do your job• You are made redundant

• You retire in line with our current policy on retirement for the purposes of the SIP

• The part of the company or business you work for is sold or transferred

• You die (in this situation, the people managing your estate will not have to pay income tax or NICs on the value of your Free Shares).

If you leave Royal Mail for any of the reasons above, the Trustee will take your Free Shares out of the SIP. You can instruct Equiniti to either sell your shares or transfer the shares to you for you to continue to hold outside the SIP.

You will not have to pay any income tax or NICs on the value of your Free Shares, regardless of when you leave (or die).

Frequently asked questions (continued) Jargon buster

AdministratorOur administrator is Equiniti Limited (Equiniti). Their role is to oversee and administer the Royal Mail Employee Share Offers and also the Royal Mail share register. Equiniti will be your first point of contact if you have any questions about your shares.

Available sharesSIP Free Shares held for at least five years which can be withdrawn free of income tax and NICs.

Capital Gains Tax (CGT)This is a tax that is normally paid on gains made when assets (including shares) are bought and sold. CGT is not paid on shares held in a SIP. However, if you hold your shares outside the SIP, you may have to pay CGT. Every person has a yearly CGT allowance and you will not have to pay on any gains you make below your allowance. The allowance for the 2018-2019 tax year is £11,700. More information is available at www.gov.uk/capital-gains-tax/allowances

CommissionThis is the amount you may need to pay to cover the costs of processing the sale of your shares. You would pay this to the organisation that administers the sale of your shares. If you sell your shares directly from the SIP, you would pay the commission to Equiniti.

Conditional sharesSIP Free Shares which have been held between three and five years and can be withdrawn, but will be subject to income tax and NICs.

Income taxThe tax you pay on all income you receive, including shares you hold in a SIP in certain circumstances. The rate of income tax you pay will depend on your income.

Market value The market value of the shares is based on the number of shares multiplied by the share price.

National Insurance Contributions (NICs)You pay NICs to build up your entitlement to certain state benefits, including the State Pension. Like income tax, NICs are paid out of the income you earn at rates, and up to limits, that are set by Parliament.

Pre-election process Employees will need to tell Equiniti in advance if they want to sell their SIP 2013 Free Shares tax-free at the first available opportunity. The pre-election period will run from 09:00 on Monday 24 September to 16:30 on Friday 12 October 2018.

Real time dealingYou can sell your conditional and available shares in real time online via the ESP portal (www.royalmailemployeeshares.co.uk) when the stock market is open (08:00 to 16:30). You will get a quote based on the current share price, before you commit to selling your shares. This means you will have certainty of the share price at which your shares will be sold and when you will receive your sale proceeds.

RetirementOur current policy on retirement for the purposes of the SIP is that any resignation, where you are aged 60 or over and stop working, will be treated as retiring. However, this only applies to the SIP and for other benefits retirement may have a different meaning. You should also note our policy on retirement may be different when you stop working, which could be many years away.

TrusteeEquiniti Share Plan Trustees Limited, who manage the Trust for the Share Incentive Plan in line with the SIP rules.


Administrator Our administrator is Equiniti. If you still have questions after reading this booklet, you can get more information by contacting them.

Post - Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom.

Phone - Royal Mail Employee Shares Helpline: 0800 012 12 13 (or +44 121 415 0268 if you are calling from outside the United Kingdom).

Textel or Minicom number: 0800 011 3649 (or +44 121 415 7028 if you are calling from outside the United Kingdom).

The Trustee of the Share Incentive Plan The Trustee is Equiniti Share Plan Trustees Limited. They manage the SIP in line with the SIP rules. You can contact the Trustee at: Equiniti Share Plan Trustees Limited, Highdown House, Yeoman Way, Worthing, West Sussex, BN99 3HH, United Kingdom.

Important note: Calls to the Royal Mail Employee Shares Helpline are free. The helpline is open from 08:30 to 17:30, Monday to Friday, not including UK bank holidays.

Contacts

Please read the Terms and Conditions on the ESP portal (www.royalmailemployeeshares.co.uk) before making a decision about whether to hold or sell your shares.

If you have any questions about what you should do with your shares, you should get independent financial advice. Nothing in this booklet should be taken as tax or financial advice. The directors and employees of Royal Mail, the Trustee and Equiniti are not authorised to provide independent tax or financial advice.

If there is any inconsistency between this booklet and the terms and conditions of the Free Shares Offer, the SIP rules or tax legislation, they shall take priority over this booklet.

The brokers will undertake any sale of shares in accordance with separate terms and conditions in place between them, the Trustee and Equiniti. These terms and conditions will govern how the broker will effect the sale of shares and nothing in this booklet will amend those terms, unless otherwise agreed between the brokers, the Trustee and Equiniti. Any brokers will have no liability to you for any losses arising from their role.

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Fifth anniversary of the SIP 2013 FREE SHARES OFFER · SIP 2015 5 October 2015 103 5 October 2018 5...

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