Recommended Cash Offer. UK Mail Group plc. Deutsche Post AG. Scheme of Arrangement

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1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. THIS DOCUMENT CONTAINS A PROPOSAL WHICH, IF IMPLEMENTED, WILL RESULT IN THE CANCELLATION OF THE LISTING OF UK MAIL SHARES ON THE OFFICIAL LIST AND TRADING IN UK MAIL SHARES ON THE LONDON STOCK EXCHANGE S MAIN MARKET FOR LISTED SECURITIES. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are taking advice in the United Kingdom, or from another appropriately authorised independent financial adviser if you are in a territory outside the United Kingdom. If you sell, have sold or otherwise transferred all your UK Mail Shares, please forward this document (but not any accompanying personal documents), together with the accompanying Forms of Proxy, at once to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. However, such documents should not be forwarded or transmitted in or into any jurisdiction in which such act would constitute a violation of the relevant laws in such jurisdiction. If you sell, have sold or transferred only part of your holding of UK Mail Shares, you should retain those documents and should contact the bank, stockbroker or other agent through whom the sale or transfer was effected. The distribution of this document in jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. Recommended Cash Offer for UK Mail Group plc by Deutsche Post AG to be effected by means of a Scheme of Arrangement under Part 26 of the Companies Act 2006 Shareholders should read carefully the whole of this document, any information incorporated by reference into this document and the accompanying Forms of Proxy. Your attention is drawn to the letter from the UK Mail Chairman in Part I of this document which contains the unanimous recommendation of the UK Mail Directors that you vote in favour of the Scheme at the Court Meeting and the Resolution to be proposed at the General Meeting. Part II of this document contains a letter from Investec explaining the Scheme and constitutes an explanatory statement in compliance with section 897 of the Companies Act. Notices convening the Court Meeting and the General Meeting, both of which will be held at the offices of Travers Smith LLP, 10 Snow Hill, London EC1A 2AL on 18 November 2016, are set out at the end of this document. The Court Meeting will start at a.m. and the General Meeting will start at a.m. (or, if later, as soon as the Court Meeting has concluded or been adjourned). The action to be taken by UK Mail Shareholders in respect of the Meetings is set out below in the section entitled Action to be taken. Shareholders will find enclosed with this document a blue Form of Proxy for use in connection with the Court Meeting and a white Form of Proxy for use in connection with the General Meeting. Whether or not you intend to attend both or either of the Meetings in person, please complete and sign both of the enclosed Forms of Proxy and return them in accordance with the instructions printed thereon as soon as possible, but in any event so as to be received by post or, during normal business hours only, by hand to UK Mail s Registrar, Equiniti at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA at least 48 hours (excluding any part of a day that is not a working day) before the time appointed for the relevant Meeting. The Forms of Proxy have a pre-paid address for your convenience for use in the UK only. If the blue Form of Proxy for use at the Court Meeting is not returned by the above time, it may be handed to the chairman of the Court Meeting before the taking of the poll at that Meeting. However, in the case of the General Meeting, unless the white Form of Proxy is returned by the time noted above, it will be invalid. If you hold your UK Mail Shares in uncertificated form (that is, in CREST) you may vote using the CREST proxy voting service in accordance with the procedures set out in the CREST Manual (please also refer to the accompanying notes to the notice of the General Meeting set out at the end of this document). Proxies submitted via CREST (under CREST participant ID RA19) must be received by UK Mail s Registrar not later than a.m. (or, in the case of an adjourned Meeting, not less than 48 hours (excluding any part of a day that is not a working day) prior to the time and date set for the adjourned Meeting) on 16 November 2016 in the case of the Court Meeting and by a.m. on 16 November 2016 in the case of the General Meeting. The completion and return of the Forms of Proxy or the appointment of a proxy or proxies electronically will not prevent you from attending and voting in person at either of the Meetings, or any adjournment thereof, should you wish to do so. If you have any questions relating to this document or the completion and return of your Forms of Proxy, please contact the Shareholder helpline on from within the UK or on if calling from outside the UK. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The Shareholder helpline is open between 8.30 a.m. and 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Please note the Shareholder helpline cannot provide advice on the merits of the Scheme nor give any financial, investment, legal or tax advice. Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank). It is subject to supervision by the European Central Bank and by BaFin, Germany s Federal Financial Supervisory Authority. Deutsche Bank AG is acting as financial adviser to Deutsche Post DHL and no one else in connection with the Offer and will not be responsible to anyone other than Deutsche Post DHL for providing the protections afforded to its clients or for providing advice in connection with the Offer or any matter referred to herein. Investec Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK. Investec Bank plc is acting exclusively as financial adviser to UK Mail and no one else in connection with the Offer and will not be responsible to anyone other than UK Mail for providing the protections afforded to clients of Investec Bank plc nor for providing advice in connection with the Offer or any matter referred to herein. This document is dated 26 October 2016.

2 IMPORTANT NOTICE OVERSEAS JURISDICTIONS This document does not constitute an offer or an invitation to purchase or subscribe for any securities or a solicitation of an offer to buy any securities pursuant to this document or otherwise in any jurisdiction in which such offer or solicitation is unlawful. This document and the accompanying documents have been prepared in connection with proposals in relation to a scheme of arrangement pursuant to and for the purpose of complying with English law, the Code, the Listing Rules and the Rules of the London Stock Exchange and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England. Nothing in this document or the accompanying documents should be relied on for any other purpose. The distribution of this document in jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this document comes should inform themselves about and observe such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Offer disclaim any responsibility or liability for the violation of such restrictions by any person. Unless otherwise determined by Deutsche Post DHL or required by the Code, and permitted by applicable law and regulation, the Offer will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Scheme by any such means from within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this document and all documents relating to the Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this document and all documents relating to the Offer (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction. Further details in relation to Overseas Shareholders are contained in paragraph 15 of Part II of this document. All UK Mail Shareholders or other persons (including nominees, trustees and custodians) who would otherwise intend to or may have a contractual or legal obligation to forward this document and the accompanying Forms of Proxy to a jurisdiction outside the United Kingdom should refrain from doing so and seek appropriate professional advice before taking any action. No person has been authorised to make any representations on behalf of UK Mail or Deutsche Post DHL concerning the Offer which are inconsistent with the statements contained in this document and any such representations, if made, may not be relied upon as having been so authorised. The summary of the principal provisions of the Scheme contained in this document is qualified in its entirety by reference to the Scheme itself, the full text of which is set out in Part III of this document. Each UK Mail Shareholder is advised to read and consider carefully the text of the Scheme itself. UK Mail Shareholders should not construe the contents of this document as legal, tax or financial advice and should consult with their own advisers as to the matters described in this document. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This document contains statements about Deutsche Post DHL and UK Mail that are or may be forward looking statements. All statements other than statements of historical facts included in this document may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words targets, plans, believes, expects, aims, intends, will, may, anticipates, estimates, projects or words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and 2

3 management strategies and the expansion and growth of Deutsche Post DHL s or UK Mail s operations and potential synergies resulting from the Offer; and (iii) the effects of government regulation on Deutsche Post DHL s or UK Mail s business. Such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document. UK Mail and Deutsche Post DHL assume no obligation to update or correct the information contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required. DEALING DISCLOSURE REQUIREMENTS OF THE CODE Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) of the Code applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) of the Code applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code. Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Code). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel s website at including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Panel s Market Surveillance Unit on +44 (0) if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure. 3

4 PUBLICATION OF THIS DOCUMENT ON WEBSITE A copy of this document (together with any document incorporated by reference) is and will be available, free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions on Deutsche Post DHL s website at and UK Mail s website at during the course of the Offer. For the avoidance of doubt, the contents of these websites and any websites accessible from hyperlinks on these websites are not incorporated into and do not form part of this document. ELECTRONIC COMMUNICATIONS Please be aware that addresses, electronic addresses and certain information provided by UK Mail Shareholders, persons with information rights and other relevant persons for the receipt of communications from Deutsche Post DHL may be provided to Deutsche Post DHL during the Offer Period as requested under Section 4 of Appendix 4 of the Code to comply with Rule 2.11(c) of the Code. RIGHT TO RECEIVE DOCUMENTS IN HARD COPY FORM Any person entitled to receive a copy of documents, announcements and information relating to the Offer is entitled to receive such documents in hard copy form. Such person may request that all future documents, announcements and information in relation to the Offer are sent to them in hard copy form. A hard copy form will not be sent to any person unless requested from Equiniti by way of either written request to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA or request by telephone on (when telephoning from inside the UK) or on +44 (0) (when telephoning from outside the UK). You may request a hard copy of any information published on Deutsche Post DHL s website by contacting Ammar Altaf on +44 (20) ROUNDING Certain figures included in this document have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. 4

5 ACTION TO BE TAKEN This section should be read in conjunction with the rest of this document and, in particular, the notices of the Court Meeting and the General Meeting at the end of this document. Please check you have received the following with this document: a blue Form of Proxy for use in respect of the Court Meeting; and a white Form of Proxy for use in respect of the General Meeting. If you have not received all of these documents please contact UK Mail s Registrar on the telephone number set out below. Whether or not you plan to attend the Meetings: 1. COMPLETE AND RETURN THE BLUE FORM OF PROXY, TO BE RECEIVED BY NO LATER THAN A.M. ON 16 NOVEMBER 2016; AND 2. COMPLETE AND RETURN THE WHITE FORM OF PROXY, TO BE RECEIVED BY NO LATER THAN A.M. ON 16 NOVEMBER 2016 (or, in the case of an adjourned Meeting, not less than 48 hours (excluding any part of a day that is not a working day) before the time and date set for the adjourned Meeting). If you require assistance relating to the completion and return of the Forms of Proxy, please telephone Equiniti on (from within the UK) on (from outside the UK) Lines are open from 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (except English and Welsh public holidays). Calls to the Shareholder helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephone and calls may be recorded and randomly monitored for security and training purposes. Please note the Shareholder helpline cannot provide advice on the merits of the Scheme nor give any financial, investment, legal or tax advice. If the blue Form of Proxy for use at the Court Meeting is not returned by the above time, it may be handed to the chairman of the Court Meeting before the taking of the poll at that Meeting. However, in the case of the General Meeting, unless the white Form of Proxy is returned by the time noted above, it will be invalid. Holders of UK Mail Shares are entitled to appoint a proxy in respect of some or all of their UK Mail Shares and may also appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by such holder. Holders of UK Mail Shares who wish to appoint more than one proxy in respect of their holding of UK Mail Shares should contact Equiniti for further Forms of Proxy. The completion and return of the Forms of Proxy will not prevent you from attending and voting at the Court Meeting or the General Meeting, or any adjournment thereof, in person should you wish to do so. The Scheme requires approval at a meeting of the Scheme Shareholders convened by order of the Court to be held at the offices of Travers Smith LLP, 10 Snow Hill, London EC1A 2AL at a.m. on 18 November Implementation of the Scheme also requires the passing of the Resolution by the UK Mail Shareholders to be proposed at the General Meeting to approve certain matters relating to the Scheme (the General Meeting will be held immediately after the Court Meeting). 5

6 To vote at the Meetings using a proxy appointment through CREST CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so using the procedures described in the CREST Manual, which can be viewed at CREST personal members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction ) must be properly authenticated in accordance with Euroclear s specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by UK Mail s Registrar, Equiniti (under CREST participant ID RA19) not later than a.m. on 16 November 2016 in the case of the Court Meeting and not later than a.m. on 16 November 2016 in the case of the General Meeting (or, in the case of an adjourned Meeting, by no later than 48 hours (excluding any part of a day that is not a working day) before the time fixed for the holding of the adjourned Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST application host) from which the issuer s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. CREST members and, where applicable, their CREST sponsors or voting service providers, should note that Euroclear does not make available special procedures in CREST for any particular message. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. CREST members and, where applicable, their CREST sponsors or voting system providers, are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. UK Mail may treat as invalid a CREST Proxy Instruction in the circumstances set out in regulation 35(5)(a) of the Uncertificated Securities Regulations. IT IS IMPORTANT THAT, FOR THE COURT MEETING, AS MANY VOTES AS POSSIBLE ARE CAST SO THAT THE COURT MAY BE SATISFIED THAT THERE IS A FAIR REPRESENTATION OF SCHEME SHAREHOLDER OPINION. YOU ARE THEREFORE STRONGLY URGED TO SIGN AND RETURN YOUR FORMS OF PROXY, OR APPOINT A PROXY ELECTRONICALLY, AS SOON AS POSSIBLE. Shareholder helpline If you have not received all the relevant documents or have any questions about this document, the Meetings or the completion and return of the Forms of Proxy, please call UK Mail s Registrar, Equiniti, on or (if calling from outside the UK) between 8.30 a.m. and 5.30 p.m., Monday to Friday (excluding public holidays in England and Wales). Calls from outside the UK will be charged at the applicable international rate. Different charges may apply to calls made from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Please note the Shareholder helpline cannot provide advice on the merits of the Scheme nor give any financial, investment, legal or tax advice. 6

7 CONTENTS Page Expected Timetable Of Principal Events 8 Part I Letter from the Chairman of UK Mail Group plc 10 Part II Explanatory Statement 18 Part III The Scheme of Arrangement 29 Part IV Conditions to the Implementation of the Offer 36 Part V United Kingdom Taxation 46 Part VI Additional Information 48 Part VII Information Incorporated by Reference 59 Part VIII Definitions 61 Part IX Notice of Court Meeting 66 Part X Notice of General Meeting 68 Part XI Employee Consultative Group s Opinion on the effects of the Offer 71 7

8 EXPECTED TIMETABLE OF PRINCIPAL EVENTS The following indicative timetable sets out expected dates for the implementation of the Scheme. All times shown in this document are London times unless otherwise stated. Event Time and/or date Publication of this document 26 October 2016 Latest time for receipt of Forms of Proxy for: Court Meeting (blue form) a.m. on 16 November 2016 (1) General Meeting (white form) a.m. on 16 November 2016 (1) Voting Record Time for the Court Meeting and General Meeting 6.30 p.m. on 16 November 2016 (2) Court Meeting a.m. on 18 November 2016 General Meeting a.m. on 18 November 2016 (3) Agreed Dividend Record Date Close of business on 25 November 2016 Agreed Dividend payment date 2 December 2016 The following dates given are indicative only, are based on UK Mail s current expectations and may be subject to change (4). UK Mail will give adequate notice of all of these dates, when known, by issuing an announcement through a Regulatory Information Service and by posting notice of these dates on its website Further updates of changes to other times or dates indicated above shall, at UK Mail s discretion, be notified in the same way. All UK Mail Shareholders have the right to attend the Scheme Court Hearing. Scheme Court Hearing (to sanction the Scheme) A date expected to be 20 December 2016, subject to regulatory clearances ( D ) (5) Last day of dealings in, and for registrations of transfers of, UK Mail Shares Dealings in UK Mail Shares suspended Scheme Record Time Effective Date of the Scheme Cancellation of admission of and dealings in UK Mail Shares Latest date for despatch of cheques and/or crediting of CREST accounts for cash consideration due under the Scheme 21 December 2016 (D+1) 5.00 p.m. on 21 December 2016 (D+1) 6.30 p.m. on 21 December 2016 (D+1) 22 December 2016 (D+2) by a.m. on 23 December 2016 (D+3) 14 days after the Effective Date Long Stop Date 28 September 2017 (6) Notes: The Court Meeting and the General Meeting will both be held at the offices of Travers Smith LLP, 10 Snow Hill, London EC1A 2AL. Please see the section entitled Action to be taken below. 1. If the blue Form of Proxy for the Court Meeting is not received by UK Mail s Registrar, Equiniti, by a.m. on 16 November 2016, it may be handed to the chairman of the Court Meeting at any time before the taking of the poll at that Meeting and still be valid or, if the Court Meeting is adjourned, not later than 48 hours (excluding any part of a day that is not a working day) before the time fixed for the holding of the adjourned Meeting. However, the white Form of Proxy for the General Meeting must be received by Equiniti by a.m. on 16 November 2016 in order for it to be valid or, if the General Meeting is adjourned, not later than 48 hours (excluding any part of a day that is not a working day) before the time fixed for the holding of the adjourned Meeting. 2. If either the Court Meeting or the General Meeting is adjourned, the Voting Record Time for the adjourned Meeting will be 6.30 p.m. on the day which is two Business Days before the date fixed for the adjourned Meeting. 8

9 3. The General Meeting will commence at a.m. on 18 November 2016 or, if later, as soon thereafter as the Court Meeting has concluded or been adjourned. 4. These dates are indicative only and will depend, amongst other things, on the date upon which (i) the Conditions are either satisfied or (if capable of waiver) waived; (ii) the Court sanctions the Scheme; and (iii) the Scheme Court Order is delivered to the Registrar of Companies. 5. Any references to a day after D are references to a Business Day. 6. This is the latest date by which the Scheme may become effective unless UK Mail and Deutsche Post DHL agree, with the consent of the Panel and (if required) the Court, a later date. 9

10 PART I LETTER FROM THE CHAIRMAN OF UK MAIL GROUP PLC Directors: Registered Office: Peter Kane (Chairman) Steven Glew (Group Finance Director) Chris Mangham (Chief Information Officer) Peter Fuller (Group Operations Director) Michael Findlay (Non-executive Director) William Spencer (Non-executive Director) Jessica Burley (Non-executive Director) 120 Buckingham Avenue Slough Berkshire SL1 4LZ Registered in England and Wales under no October 2016 To UK Mail Shareholders, persons with information rights and for information only, to participants in the UK Mail Employee Share Plans Dear Shareholder, RECOMMENDED CASH OFFER FOR UK MAIL GROUP PLC BY DEUTSCHE POST AG 1. Introduction On 28 September 2016, the boards of Deutsche Post DHL and UK Mail announced that they had reached agreement on the terms of a recommended cash offer pursuant to which Deutsche Post DHL will acquire all the entire issued and to be issued ordinary share capital of UK Mail for 440 pence in cash per UK Mail Share. It was also announced that the Offer would be effected by means of a scheme of arrangement under Part 26 of the Companies Act. This letter sets out the background to the Offer and explains why the UK Mail Directors, who have been so advised by Investec, consider the Offer to be fair and reasonable and why they unanimously recommend that UK Mail Shareholders should vote in favour of the Scheme at the Court Meeting and the Resolution to be proposed at the General Meeting. In order to approve the terms of the Scheme by which the Offer is to be implemented, a sufficient majority of Scheme Shareholders will need to vote in favour of the Scheme at the Court Meeting and UK Mail Shareholders will need to pass the Resolution to be proposed at the General Meeting. Details of the actions you should take are set out in paragraph 14 of this letter. The recommendation of the UK Mail Directors is set out in paragraph 16 of this letter. 2. The Offer The Offer will, if approved, be effected by means of a scheme of arrangement between UK Mail and the Scheme Shareholders under Part 26 of the Companies Act. In compliance with section 897 of the Companies Act, details of the Scheme are set out in the Explanatory Statement in Part II of this document. (a) Consideration Under the terms of the Offer, which is subject to the Conditions and the further terms set out in Part IV of this document and which includes obtaining the necessary merger control clearance should the Offer fall within the scope of Council Regulation (EC) 139/2004, Scheme Shareholders on the register of members of UK Mail at the Scheme Record Time will be entitled to receive: 10

11 for each Scheme Share: 440 pence in cash The Offer values the entire issued ordinary share capital of UK Mail at approximately million and the price per UK Mail Share which Scheme Shareholders would receive under the Offer represents: a premium of approximately 43.1 per cent. to the Closing Price of pence on 27 September 2016 (being the latest practicable date prior to the start of the Offer Period); and a premium of approximately 43.2 per cent. to the volume-weighted average price for the three-month period ending on 27 September 2016 (being the latest practicable date prior to the start of the Offer Period) of pence. In addition, UK Mail Shareholders who are on the register of members of UK Mail at the close of business on 25 November 2016 will be entitled to receive the Agreed Dividend of 5.5 pence per UK Mail Share which is intended to be paid on 2 December If any dividend or other distribution is authorised, declared, made or paid in respect of UK Mail Shares during the Offer Period other than the Agreed Dividend, or in excess of the Agreed Dividend, Deutsche Post DHL reserves the right to reduce the Offer Price by the amount of all or part of any such excess, in the case of a dividend or other distribution in excess of the Agreed Dividend, or otherwise by the amount of any such dividend or other distribution. (b) Scheme becoming effective The Scheme and the Offer are subject to satisfaction or (if applicable) waiver of the Conditions set out in Part IV of this document. To become effective, the Scheme requires the approval of Scheme Shareholders at the Court Meeting. The resolution to approve the Scheme at the Court Meeting must be approved by a majority in number of the Scheme Shareholders present and voting (and entitled to vote), either in person or by proxy, representing at least 75 per cent. in value of the Scheme Shares voted. Implementation of the Scheme also requires the passing of the Resolution (requiring the approval of UK Mail Shareholders representing at least 75 per cent. of the votes cast, either in person or by proxy) to be proposed at the General Meeting to approve certain matters relating to the Scheme. Once the necessary approvals from the Scheme Shareholders have been obtained and the other Conditions have been satisfied or (where applicable) waived, the Scheme must be sanctioned by the Court. The Scheme will then become effective upon delivery of the Scheme Court Order to the Registrar of Companies. Subject to satisfaction or waiver of the Conditions, the Scheme is expected to become effective in December The Offer will lapse if: the Court Meeting and the General Meeting are not held by 10 December 2016 (or such later date as may be agreed between Deutsche Post DHL and UK Mail); the Court hearing to approve the Scheme is not held by 31 January 2017 (or such later date as may be agreed between Deutsche Post DHL and UK Mail); or the Scheme does not become effective by the Long Stop Date, provided however that the deadlines for the timing of the Court Meeting, the General Meeting and the Court hearing to approve the Scheme as set out above may be waived by Deutsche Post DHL, and the deadline for the Scheme to become effective may be extended by agreement between UK Mail and Deutsche Post DHL and (if required) with the consent of the Panel and the Court. If the Scheme becomes Effective, it will be binding on all Scheme Shareholders, irrespective of whether or not they attended or voted (in favour or otherwise) at the Court Meeting or the General Meeting. Further details of the Scheme are set out in the Explanatory Statement in Part II of this document. It is expected that UK Mail will close its register of members of UK Mail after close of business on 21 December 2016 and the listing of the UK Mail Shares on the Official List and dealings in such shares on the London Stock Exchange will be suspended from 5.00 p.m. on 21 December Application will be made to the UK Listing Authority for the listing of the UK Mail Shares on the Official List to be 11

12 cancelled as of the day following the Effective Date and to the London Stock Exchange for such shares to cease to be admitted to trading on its Main Market for listed securities as of the day following the Effective Date. If the Scheme becomes Effective, (i) cheques in respect of the cash consideration will be despatched by post to Scheme Shareholders at their own risk or (ii) transfers in respect of the cash consideration will be made by electronic means to such bank account details as have been provided to the Corporate Actions team at UK Mail s Registrar prior to the Scheme Record Time (or the cash consideration will be settled through CREST, as the case may be) as soon as practicable and, in any event, no later than 14 days after the Effective Date. The Agreed Dividend is expected to be paid on 2 December Background to and reasons for the Offer Deutsche Post DHL is the world s leading mail and logistics group, active in more than 220 countries and territories, deploying approximately 500,000 personnel to deliver a full range of communications and logistics services to its customers, from standardised products through to innovative and tailored solutions. As a core part of its Strategy 2020, Deutsche Post DHL sets out its aims for continued expansion in growth markets and segments. Consistent with the strength of its experience in its German parcel business, Deutsche Post DHL believes that the acquisition of UK Mail will allow it to bring its expertise in e-commerce and parcel delivery together with UK Mail s existing customer base and network, to drive substantial shareholder value. As a result, the board of Deutsche Post DHL believes that an acquisition of UK Mail presents an attractive opportunity for all stakeholders. Strengthens Deutsche Post DHL s European market position Deutsche Post DHL will be able to increase its network coverage to include a direct commercial and operational presence, including pick-up and delivery capabilities, in the UK, Europe s largest e-commerce market, and to benefit from the strong growth in parcel volumes to and from the UK. Enhances Deutsche Post DHL s and UK Mail s customer value proposition UK Mail s customers will gain direct access to the global Deutsche Post DHL network, allowing them to benefit from Deutsche Post DHL s comprehensive logistics capabilities across product categories, whilst also providing Deutsche Post DHL s existing customer base with enhanced access to the UK market via UK Mail s high quality UK network. Deutsche Post DHL otherwise intends to maintain the status of its existing customer relationships. Strengthens UK Mail s UK market position UK Mail will have the opportunity to win additional customer business with Deutsche Post DHL s existing customer base and gain know-how, and operational and financial support. Deutsche Post DHL will also maintain and develop UK Mail s profitable domestic mail operations, sharing its considerable experience and expertise in this area. In addition, Deutsche Post DHL will support continued product and service innovation across UK Mail s business and will continue operating and supporting the UK Mail brand. Delivers significant synergy benefits Additional volume will flow through UK Mail s established network from Deutsche Post DHL s global operation. There will also be enhanced access to global export markets for UK Mail s customer volumes, shared know-how, IT solutions and innovation and other operational efficiencies. 4. Background to and reasons for recommending the Offer UK Mail is one of the largest integrated mail and parcel operators within the UK. Its strategy is to grow revenue and profitability by establishing a market leading position in the UK in its key markets of parcels and mail, with a clear focus on high service levels and network efficiency together with product and service innovation. To achieve this and to facilitate the future growth of the business, UK Mail has created additional capacity both in operations, including the establishment of a new hub near Coventry, and in support areas, including significant investment in IT. 12

13 However, the UK market for parcels and mail remains highly competitive. High service levels and a low cost efficient network are key to attracting and retaining customers while generating attractive returns. This requires continued investment in automation, product and service innovation and the extensive and innovative use of IT. In recent years, UK Mail has made good progress in all these areas. The Board believes that, by becoming part of the Wider Deutsche Post DHL Group, the UK Mail business will benefit from: (i) (ii) (iii) (iv) the access to Deutsche Post DHL s resources and expertise to further develop UK Mail s network and customer value proposition; the ability to continue to develop its parcels and mail businesses within Deutsche Post DHL and with the benefit of Deutsche Post DHL s greater financial and operational resources; the ability to provide both existing and new UK customers with international fulfilment via Deutsche Post DHL s global distribution network; and the increased volumes of parcels coming into the UK through Deutsche Post DHL s network which will result in better overhead recovery and economies of scale. The Offer provides UK Mail Shareholders with the opportunity to realise their investment for cash at a significant premium to the levels where the share price has traded in recent months. Accordingly, taking into account the potential challenges associated with the execution of UK Mail s stand alone strategy, the UK Mail Directors believe that the terms of the Offer are fair and reasonable. 5. Current trading and prospects 5.1 UK Mail On 14 July 2016, UK Mail announced its annual general meeting trading update for the period from 1 April 2016 to 30 June 2016, which is set out below: We have made a solid start to the current financial year, with overall performance for the first quarter in line with our previous expectations. The move of our second hub has been successfully completed, with very high service levels maintained throughout the period. We continue to make good progress with our plans to improve the efficiency of our operations. The Group remains in a sound financial position. Since 14 July 2016, there has been no change to management s expectations of the outcome for the financial year ending 31 March In the ordinary course, UK Mail is expecting to publish its unaudited interim results for the six months ended 30 September 2016 on 17 November 2016, a copy of which can be found on UK Mail s website at Deutsche Post DHL Current trading for Deutsche Post DHL continues in line with statements made in its announcement on 3 August 2016 in respect of its unaudited results for the six months ended 30 June 2016, a copy of which can be found on Deutsche Post DHL s website at 6. Irrevocable undertakings As at the date of this document, Deutsche Post DHL has received irrevocable undertakings in respect of a total of 34,513,523 UK Mail Shares representing, in aggregate, approximately 62.6 per cent. of UK Mail s ordinary share capital in issue on 25 October 2016 (being the latest practicable date prior to the publication of this document). Further details of these irrevocable undertakings are set out in paragraph 3 of Part II of this document. 13

14 7. Information on Deutsche Post DHL Deutsche Post DHL is an Aktiengesellschaft (corporation limited by share ownership) registered in Germany, with shares listed on the Frankfurt Stock Exchange. It is the world s leading mail and logistics group. Deutsche Post DHL is focused on being the first choice for customers, employees and investors in its core business areas worldwide. It makes a positive contribution to the world by connecting people and enabling global trade while being committed to responsible business practices and corporate citizenship. Deutsche Post DHL operates under two brands: Deutsche Post, which is Europe s leading postal service provider; and DHL, which is uniquely positioned in the world s growth markets, with a comprehensive range of international express, freight transportation, e-commerce and supply chain management services. Deutsche Post DHL is the leading parcel delivery company in Germany, Europe s largest parcel market by volume, and has expanded its cross-border network since 2014 to cover 18 European countries. Deutsche Post DHL has pioneered a number of innovative solutions, from same-day and time-specific delivery to automated packstations and parcel shops that maximize delivery convenience. Deutsche Post DHL employs approximately 500,000 employees in over 220 countries and territories worldwide. In 2015, Deutsche Post DHL generated revenues of more than 59 billion. 8. Information on UK Mail UK Mail is a public limited company registered in England and Wales. The UK Mail Shares are listed on the Official List of the London Stock Exchange. Founded in 1971 by the current Chairman, Peter Kane, UK Mail is one of the largest integrated mail and parcel operators within the UK, offering parcel and mail delivery solutions both locally and worldwide. With a national network of more than 50 sites (including an automated national hub in Ryton which can process up to 20,000 parcels per hour), 2,800 employees and 2,400 vehicles, UK Mail is able to offer business customers a unique integrated service with a full range of time-sensitive and secure delivery options for parcels and letters. For the year ended 31 March 2016, UK Mail reported a profit before tax and exceptional items of 10.7 million (2015: 21.0 million) on revenue of million (2015: million). 9. Management, employees and locations Deutsche Post DHL believes that the acquisition of UK Mail will allow it to bring its expertise in e-commerce and parcel delivery together with UK Mail s existing customer base and network, to drive substantial shareholder value. Deutsche Post DHL attaches great importance to the skills, knowledge and experience of UK Mail s management team and employees and believes that they will benefit from greater career and business opportunities as part of Deutsche Post DHL. Deutsche Post DHL confirms that, following completion of the Offer, it intends to observe fully the existing contractual and statutory employment rights of UK Mail s management and employees in accordance with applicable law. To date, Deutsche Post DHL has been provided with only limited access to information relating to UK Mail, its employees, management, facilities and operations. Accordingly, Deutsche Post DHL s assessment of potential integration opportunities resulting from the Offer is based on its own knowledge and publicly available data. Following completion of the Offer, Deutsche Post DHL intends to carry out a detailed strategic review of UK Mail s employees, management, facilities and operations to formulate an integration plan. It is expected that this detailed review will be carried out after completion of the Offer. Whilst this detailed strategic review has not yet been developed, Deutsche Post DHL expects it will assess in detail UK Mail s cost base and footprint. Other than the arrangement proposed to be entered into between Deutsche Post DHL and Peter Kane (see paragraph 10 of this Part I for further details), at this stage no decisions have been taken in relation to specific employees, management, facilities and operations. 14

15 On the basis of its preliminary analysis, Deutsche Post DHL does not expect to make material changes to UK Mail s existing operations and has no current intention of redeploying UK Mail s fixed assets. As such, at this stage Deutsche Post DHL does not expect to make changes to the location of significant UK Mail operations, such as UK Mail s Ryton facility, which it expects to maintain as the key hub for UK Mail s business. It is intended that the non-executive directors of UK Mail will resign as directors of UK Mail following the Effective Date. Deutsche Post DHL intends that, following completion of the Offer, UK Mail will comply with its current obligations to all its pension schemes. The Board believes that UK Mail will benefit significantly from becoming part of Deutsche Post DHL, the world s leading mail and logistics group. The Board is pleased that Deutsche Post DHL sees the acquisition of UK Mail as a core part of its Strategy 2020, that it attaches great importance to the skills, knowledge and experience of UK Mail s management team and employees, and that it envisages those employees benefitting from greater career and business opportunities as part of Deutsche Post DHL. On 18 October 2016, UK Mail received an opinion from its Employee Consultative Group, which is set out in Part XI to this document. 10. Arrangements between Deutsche Post DHL and Peter Kane In addition to the existing executive chairman role which Peter Kane will continue to hold on the terms summarised in paragraph 7.2 of Part VI of this document, Deutsche Post DHL intends to enter into a one-year consultancy arrangement on completion of the Offer with Peter Kane pursuant to which Peter Kane will continue to act as interim Chief Executive Officer of the UK Mail business whilst assisting with the identification of a new Chief Executive Officer and supporting the successful continuation of the UK Mail business as part of the Wider Deutsche Post DHL Group. A summary of the terms of the consultancy agreement is set out below. The terms of the consultancy agreement with Peter Kane are for a fixed period of one year from the date of completion of the Offer, subject to the right of either party to terminate on not less than one month s notice and the right of Deutsche Post DHL to terminate on payment of a sum in lieu of notice. Peter Kane will be entitled to an annual consultancy fee of 305,000 (excluding VAT) which will be pro-rated to reflect the actual number of days worked each month. Unless the consultancy agreement is terminated for cause (as detailed below), for a period of six months following termination of the consultancy agreement, Peter Kane will be entitled to continued coverage under Deutsche Post DHL s private health insurance and continued secretarial support from the Deutsche Post DHL s office in Slough. Deutsche Post DHL will be entitled to terminate the engagement for cause with immediate effect if Peter Kane is: (i) guilty of gross misconduct; (ii) commits a material breach of the obligations under the consultancy agreement; or (iii) after notified in writing, wilfully neglects to provide or fails to remedy any default in providing the consultancy services (other than as a result of illness or accident). For a period of 12 months following termination of the consultancy agreement, Peter Kane will be subject to restrictive covenants. These include non-compete, non-solicitation of clients or customers, non-dealing with clients or customers and non-solicitation of senior or key employees covenants. Investec, advising UK Mail, consider the terms of such arrangements to be fair and reasonable. 11. UK Mail Employee Share Plans Appropriate proposals, including the offer of a cash compensation payment to the holders of certain options under the SAYE Scheme (as defined in paragraph 12 of Part II of this document), will be made to holders of options/awards under the UK Mail Employee Share Plans. Information relating to the effect of the Scheme on participants in the UK Mail Employee Share Plans is set out in paragraph 12 of Part II of this document. 15