Policy Framework

The objective of the Policy is to attract, reward and retain qualified Board of Management members to set and implement our purpose, ambition, strategy, objectives and culture. The Policy is built on the following principles:

• Alignment

• Transparent

• Compliant

• Simple

• Sustainable

The Supervisory Board applies a holistic view towards remuneration whereby both internal- and external perspective are taken into account:

• Market perspective is one of the factors that the Supervisory Board takes into account when determining adequate remuneration levels to attract and retain qualified leaders. The Supervisory Board reviews a peer group to ensure a balanced representation of the relevant labour market. The main criteria applied to determine the peer group are Dutch listing and comparability to PostNL in terms of size (revenue, employees, market capitalisation, assets), board structure and geographical focus. PostNL will benchmark its remuneration against a reassessed peer group at least every four years. We refer to our website for the 2020 peer group.

• The remuneration for the Executive Committee, other senior management and employees who fall under a Collective Labour Agreement, is intended to be aligned with the principles underlying the Policy for the Board of Management. Such in order to establish internal consistency within salary structure, design of incentive plans and guidelines for salary increases. In this regard, the Supervisory Board continuously monitors the development of the pay ratios.

Purpose and link to strategy:

• Provides a fixed level of earnings to attract and retain the Board of Management to execute PostNL’s strategy.

Operation:

• The Supervisory Board sets base salaries in line with the opportunity and takes multiple factors into account, such as environment and societal context where PostNL operates in, the nature and responsibility of the role, individual and business performance, the pay conditions of PostNL’s broader employee population and market positioning.

• A possible regular annual increase is capped at the salary increase of the broader PostNL workforce, as agreed upon in the PostNL Collective Labour Agreement.

Opportunity:

• Base salary levels are set at around the median market level of the peer group.

Purpose and link to strategy:

• Rewards the delivery of short-term performance and takes into account the interests of multiple stakeholders.

Performance framework and operation:

• The Supervisory Board sets challenging and realistic targets for each performance measure.

• Performance period: one year.

• At the end of the performance period, the Supervisory Board determines which targets on each of the performance measures have been achieved. A performance measure can only contribute to pay-out if it is fully met, which means there is no stretch and no threshold.

• The STI is paid on an annual basis in cash.

• The quantifiable performance measures are defined, weighted and linked to the strategy as shown below:

Performance measure

Definition

Weight

Link to strategic objectivs

Profitability

Earnings before interest and taxes adjusted for the impact of project costs and incidentals (normalised EBIT)

30%

Cash generation

Cash flow available for dividend payments to shareholders, acquisition of group companies and bond repayments (free cash flow)

30%

Total financial performance measures

60%

Employee engagement

The share of engaged employees

10%

Attract and retain motivated people

Customer satisfaction

The share of customers who are at least very satisfied

10%

Help customers to grow their business

Quality Mail

Mail sent by consumers and delivered the next day to all Dutch households

10%

Secure a sustainable mail business

Quality Parcels

The share of parcels with an on-time, first-time delivery attempt

10%

Help customers to grow their business

Total non-financial performance measures

40%

Opportunity:

• Set with a reference to the 25th percentile of the peer group.

• The maximum value is set at 37.5% of annual base salary for all Board of Management members.

Purpose and link to strategy:

• Rewards long-term value creation to PostNL’s strategy and reinforces alignment with shareholder interests by granting share.

Performance framework and operation:

• The Supervisory Board sets challenging and realistic target levels for each performance measure.

• Performance period: three years.

• Ordinary PostNL shares will be conditionally granted.

• At the end of the performance period, the Supervisory Board determines the extent to which targets on each of the performance measures have been achieved and consequently to which extent the conditional shares and their dividend equivalent will vest. There is no vesting below threshold.

• Upon vesting, performance shares and their conditional dividend equivalent are subject to a holding period of two years. Therefore, the performance shares are blocked for a total period of 5 years.

• The quantifiable performance measures are defined, weighted and linked to the strategy as shown on the next page:

Performance measure¹

Definition

Weight

Link to strategic objectives

Earnings attributable to shareholders

Cumulative net earnings attributable to the shareholders, adjusted for the impact of project costs and incidentals (cumulative normalised comprehensive income)

33.33%

Cash generation

Cumulative cash flow available for dividend payments to shareholders, acquisition of group companies and bond repayments (free cash flow)

33.33%

Total Financial performance measures

66.67%

Climate impact

CO₂ efficiency of our own operations

33.33%

Improve environmental impact

Total non-financial performance measures

33.33%

Opportunity:

• Set with a reference to the 25th percentile of the peer group.

• The maximum value is set at 37.5% of annual base salary for all Board of Management members.

Purpose and link to strategy:

• Remain competitive with the market.

Operation:

• Board of Management members are entitled to benefits such as pension benefits, risk insurances, company car, tax and social security, a fixed expense allowance and possible service costs.

• Participation in the basic pension plan provided by the Dutch pension fund (Stichting Pensioenfonds PostNL) is mandatory under conditions that apply to the participating PostNL employees.

• For the pensionable salary that is not covered by the basic pension plan, a company paid pension allowance of 19% applies. This contribution can be used to participate in the so-called Net Pension Plan. Dependents pension and waiver of premium in the event of disability are insured on a risk basis as part of the Net Pension Plan, the premium of which is paid by PostNL.

Opportunity:

• Pension and benefits are in line with market practice and are aligned with the elements applicable to the wider workforce. We refer to the website of Stichting Pensioenfonds PostNL (https://www.pensioenpostnl.nl) for the latest applicable pension agreement

Ultimate remedy, claw-back, share ownership guidelines, contractual, derogation and procedural provisions apply.

The objective of the Policy is to attract and retain qualified talent to perform the Supervisory Board’s duties and act in accordance with the interests of PostNL and its stakeholders. The Policy is built on the following principles:

• Alignment

• Independence

• Transparent

• Compliant

• Simple

The framework:

• reflects time spent and the responsibilities of the role;

• supports deployment of specific skills and competences; and

• is fixed and cash-based with no variable or share-based element and therefore not related to company performance

The Remuneration Committee takes multiple factors into account when determining compensation levels, including the type of role, the pay conditions of PostNL’s employees and relevant market developments. Compensation levels will be benchmarked at least every four years against the same peer group that is used for the Board of Management benchmark. PostNL aims to position compensation between the lower quartile and median levels of the peer group for all compensation elements of the Policy.

The Policy contains the following compensation elements:

• Board fees for chairman and members;

• Committee fees for chairman and members;

• Other benefits;

• Expenses

The fee structure is as follows:

Chairman

€55,000

Member

€40,000

Chairman Audit Committee

€10,000

Chairman Remuneration / Nomination Committee

€7,500

Member Audit Committee

€7,500

Member Remuneration / Nomination Committee

€5,000

Contractual, derogation and procedural provisions apply.