Delivering the Royal Mail IPO Experiences with Share Plans Before, During and After. John Daughtrey, Equiniti (UK) Martin Osborne-Shaw, Equiniti (UK)

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Delivering the Royal Mail IPO Experiences with Share Plans Before, During and After John Daughtrey, Equiniti (UK) Martin Osborne-Shaw, Equiniti (UK)

Agenda IPO market Our experience Delivering the Royal Mail

UK IPO MARKET 2013 the strongest year for London IPOs since the global financial crisis Q4 saw 4.1bn raised to date, the strongest finish to a year since 2007 Total funds raised in year reached 7.1bn 2013 London IPOs are currently trading at an average of 33% above initial listing price 14 premium listings in 2013 (excluding funds), 12 of which were PE-backed

UK IPO MARKET In Qtr 4 2013 there were seven premium listings originating on the main market (excl. funds), raising 3.1bn - including the high-profile Royal Mail listing which raised 1.7bn. For the whole of 2013, there were 14 premium listings raising 5.2bn (excl. funds), which represents a significant increase in activity compared to the four IPOs during 2012 and seven in 2011.

UK IPO MARKET AIM had another strong year with 45 IPOs, up from 32 in 2012. Cumulative funds raised for the year were 507m, and the junior market continued to show its ability to draw international interest, with 28 deals originating from overseas businesses. Technology companies performed extremely strongly this year on AIM, an encouraging sign for the LSE which has stated its desire to attract more businesses from this sector which have historically favoured the US market for capital raisings.

Getting ready for life after listing Establishing plc - standard Board and Committee processes for example, terms of reference, schedule of matters reserved to the Board, a proper Board calendar and Board papers processes Implementing Audit Remuneration, Nomination Committees and other appropriate committees Policies and procedures in place that are relevant to a listed company, such as disclosure procedures and the share dealing code.

Employee remuneration Many companies will want to incentivise and retain their employees leading up to the IPO or at the IPO stage. This can be achieved by offering employee share schemes, which promote employee ownership and can greatly assist with staff retention and recruitment, as well as improve performance levels.

Why share plans Retention of staff lock in key management Opportunity to share in future success of the company Comparable to their competitors Attraction of staff Part of total reward

Research Since 2010 26% of IPO Companies gave free shares to all employees Approx 90% would operate a PSP/Annual Bonus plan Clawback and Malus provisions have become common practice in listed companies 83% of FTSE 100 companies 58% of FTSE 250 companies 50% of FTSE SmallCap companies Interestingly the majority of companies have also introduced these provisions at IPO. Around 80% of annual bonus plans in place at IPO and around 60% of long term plans include clawback and/or malus provisions Source: Deloitte 2014

Royal Mail Introduction to the task Free Share and Employee Priority Offer Retail IPO and Trading Operational Success 11

Timetable 10 July Ministerial Announcement 12 Sept Announcement of intention to float (AITF). - Employee packs mailed - Opt Out period begins 16 th Sept 3 rd Oct Employee Roadshows 27 th Sept Prospectus published and Retail and Priority Offer open 6 th Oct Opt out period closes 8 th Oct Retail and Priority Offer close 11 Oct Allocations announced and conditional trading begins 15 th Oct IPO Date Close of business share price used to calculate the value of the employee award 11 th Nov Allocations notices sent to employees together with details of the branded employee portal

Introduction to the task The largest government flotation in the last 20 years The government instructions to retail investors being to make it as digital as possible First UK flotation of size to be offered through online application and payment Equiniti were selected after a rigorous tender process to provide Receiving Agent Services, Employee Benefit Schemes, ongoing Registrar services and Associated Dealing Services 13

Free Share and Employee Priority Offer Royal Mail committed to provide staff with 10% of the value of the company After looking at a number of options the government chose a tax efficient SIP Free share award Over 100 road shows were carried out from Exeter to Inverness aligned with post workers shift patterns Equiniti staff met face to face with 4500 Royal Mail staff 14

Free Share and Employee Priority Offer We answered in excess of 8000 questions relating the Free share offer and the Employee Priority offer Over 150,000 eligible staff were sent details of the free share offer and 15,000 employees took up the employee priority offer We worked closely with Royal Mail to produce a comprehensive suite of information materials, delivered in various formats across multiple channels

Free Share and Employee Priority Offer Normal practice is that employees have to elect for free shares, after consultation, HMRC approval allowed employees automatically receive the shares unless they opted out Take up for free shares was 99.7% (372 opt outs) All full time employees were allocated 725 shares Due to sharp rise in price and capped values for free share allocations each year we allocated 613 shares per employee and will allocate the remainder in 2014 tax year 16

Retail IPO and Trading In early October, the retail IPO opened with an 12 day receiving period Trading commenced on Tuesday 15 October which saw unprecedented calls into our Contact Centre, dealing via Shareview and a dedicated telephony service as well as postal dealing Over 400,000 people were successful in purchasing shares in Royal Mail Group Nearly 90% of those applying did so online 17

Retail IPO and Trading 25,000 sales processed in a single day a record for any provider We extended our multi-channel approach to provide maximum access to the market including: Real-time online and phone channels New ATI 24/7 channel (Automated Telephone Instruction application using the keypad, developed and delivered in record time) Streamlined postal service

Operational Success We scaled up our facilities to accommodate an additional 250 staff to work on the project We carried on with BAU as well as another major transaction whilst carrying out the project and still maintained customer satisfaction at 93% Created a new web facility whereby nearly 90% applications and payments were made

Operational Success Our Contact Centre handled nearly 140,000 calls We received over web 349,000 applications Over 55,000 paper applications were processed There are over 400,000 shareholders on the Royal Mail register 20

Operational Success Over 100 road shows were carried out for Royal Mail staff We received a record 6500 application website hits per second at the peak in the closing two days of the offer 30,000 non-personalised application forms were captured using our comprehensive scanning capabilities Over 275,000 refunds made at the rate of 1,000 per minute returning over 800 million to the applicants in just one day

Thank You John Daughtrey Equiniti John.Daughtrey@Equiniti.com Martin Osborne-Shaw Equiniti martin.osborne-shaw@equiniti.com