bpost SA/NV

Annual Report • Apr 11, 2014

$\mathbf{1}$ .	Selected financial figures
2.	Key events of the year
$\overline{3}$ .	Financial statements
	3.1. Income statement
	3.2. Balance sheet
	3.3. Changes in shareholders equity
4.	Comments on figures
	4.1. Income Statement
	4.2. Balance Sheet
5.	Risks and uncertainties
6.	Research and Development
7.	Profit appropriation
8.	Branches
9.	Important events after the balance sheet date
10.	Management and remuneration
11.	Information required by article 523 of the Companies code 44
12.	Information required by article 624 of the Companies code 45

Million C	2013	2012
Operating income	2.275,0	2.291,3
Payroll costs	1.233,4	1.290,6
Other operating costs	633,5	630,7
Profit from operating activities (EBIT)	408,1	370,0
Earnings after taxes	248,2	171,9
Other key figures
Dividend per share $(\epsilon)$ (*)	1,1	0,85
Number of employees (headcount at year end)	28.112	29.382
Number of employees (FTE at year end)	24.615	25.675

2. Key events of the year

Appeal of the decision taken by Belgian Competition Authority

In January 2013, bpost appealed the decision taken in December 2012 by the Belgian Competition Authority related to the imposition of a fine of 37,4 million EUR upon the Company for abuse of dominant position in respect of its "per sender" model pricing policy.

This pricing policy, which had been introduced by bpost in 2010, consisted in calculating volume rebates based on volumes of mail sent by the individual end customers, i.e. on a revenue per sender basis rather than the aggregate volumes handled by intermediaries. In 2011, the IBPT/BIPT had concluded that this policy towards intermediaries infringed the non-discrimination and transparency obligations imposed by the Law of 1991. In light of the IBPT/BIPT's decision, bpost agreed to discontinue the "per sender" model in August 2011 and adapted its commercial pricing policies which resulted in intermediaries having access to volume rebates on a consolidated basis.

The appeal is currently pending before the Brussels Court of Appeal. bpost paid the fine during the first quarter of 2013 pending the outcome of the appeal.

Capital reduction and exceptional dividend

On March 25, 2013, an extraordinary shareholders' meeting of the Company approved (i) a share capital reduction of 144,5 million EUR through return of capital to the shareholders of the Company and (ii) a reduction in the legal reserve in the amount of 21,3 million EUR through the transfer to available reserves and the subsequent payment of an exceptional dividend of 53,5 million EUR from available reserves and retained earnings.

Acquisition of the final 20% shares of MSI

In June 2013, boost acquired the final 20% of the MSI shares which were still held by the minority shareholders for an amount of 5,3 million USD. MSI is a company based in the USA and is active in international mail.

SGEI overcompensation for the period 2011-2012

In 2009, the European Commission launched an investigation into possible illegal state aid. The investigation covered all aspects of bpost's business over the period 1992-2012. The European Commission concluded that bpost had been compensated for the performance of the Services of General Economic Interests (SGEI) for the period 2005-2012 and ordered the repayment to the Belgian State of the alleged overcompensation. In 2012, bpost repaid an amount of 300,8 million EUR (including interest but net of taxes) in respect of the period from 1992 to 2010. An additional amount of 123,1 million EUR (including interest but gross of tax) in respect of the period 2011-2012 was repaid in the first half of 2013. This repayment had no impact on bpost's 2013 results.

The investigation into the illegal state aid ended with this repayment.

$4/45$

Management Report 2013

Approval of the 5^th Management Contract

On May 2, 2013, the European Commission approved the 5^th Management Contract, which sets forth the terms and conditions pursuant to which bpost must fulfill certain Services of General Economic Interest (SGEI) for the period from January 1, 2013 to December 31, 2015. SGEI include, among other services, the early delivery of newspapers, the distribution of periodicals, "cash at counter" services, home delivery of pensions and social allowances and the maintenance of a retail network.

The 5^th Management Contract was approved by Royal Decree on May 29, 2013 and is effective as of January 1, 2013. It replaces the 4^th Management Contract.

Granting of a postal license to TBC-POST

In May 2013, the IBPT/BIPT granted a postal license to Mosaïc SPRL, doing business as "TBC-POST".

This license allows this company to collect and distribute addressed mail on the Belgian territory.

New Framework Agreement and capital increase bpost bank

On December 13, 2013, bpost and BNP Paribas Fortis renewed their banking partnership agreement for a period of 7 years starting on January 1, 2015 - has been signed on December 13, 2013.

The banking partnership agreement foresees that:

• bpost and BNP Paribas Fortis will continue to cooperate through bpost $(i)$ bank, which will continue to be an associate of bpost;
• (ii) bpost will remain the exclusive offeror of bpost bank's products and services through its network of post offices;
• (iii) bpost will continue to provide back office activities and other ancillary services to bpost bank.

In anticipation of the capital requirements that are expected to be introduced in connection with the implementation of Basel III and CRD IV, bpost bank completed a capital increase in the amount of 100 million EUR on March 20, 2013, pursuant to which bpost contributed 37,5 million EUR in cash (following the capital increase, bpost's shareholding in bpost bank continued to be 50%). As of December 31, 2013, bpost bank's Tier I ratio was 19,75%.

Share split

The Extraordinary Shareholders' Meeting on May 27, 2013 approved a stock split of 1/488 which results in a share capital composed of 200.000.944 shares bearing same rights (further removal of classes of shares). The previous number of shares amounted to 409.838 shares.

Management Report 2013

Initial Public Offering

bpost announced on May 23, 2013 its intention to proceed with an initial public offering and listing of its ordinary shares on NYSE Euronext in Brussels (the "IPO").

On June 21, 2013, the trading of bpost's shares started on Euronext Brussels. The final offer price amounted to 14,5 EUR.

59.750.180 shares were sold (including the exercise of the over-allotment option) $to:$

• retail and institutional investors in Belgium via an initial public offering; $(i)$
• $(ii)$ Japanese investors via a public offering without listing;
• $(iii)$ "qualified institutional buyers" or "QIBs" via a private placement in the United States; and
• institutional investors in the rest of the world via private placements. $(iv)$

Concurrently, bpost implemented a share purchase plan for bpost's employees. Eligible participants were able to purchase a fixed number of shares at a price representing a discount of 16,67% to the offer price. 916.479 shares were sold to bpost's employees.

The Belgian State did not sell shares in the IPO and maintained its 50,01% participation in bpost (directly and through the SFPI/FPIM). Post Invest Europe S.à.r.l., the selling shareholders, retained a stake of 19,67% in the Company following the IPO.

Payment of an interim dividend of 0,93 EUR gross per share

On December 4, 2013, the Board of Directors approved the payment of an interim dividend of 186,0 million EUR or 0,93 EUR gross per share. This amount represents 85% of the sum of (i) the net profit after tax of bpost SA-NV for the 10 months period ended on October 31, 2013 plus (ii) an amount of 17,6 million EUR compensating for an exceptional pre-listing tax charge.

On November 7, 2013, the Board of Directors also confirmed its intention to approve the payment of a final dividend corresponding to 85% of the net profit of bpost SA-NV over the last two months of 2013.

Sale by Post Invest Europe S.àr.l. of 39.328.287 shares in bpost

On December 10, 2013, Post Invest Europe S.à.r.l. ("PIE"), announced the sale of up to 39.328.287 shares in bpost, representing approximately 19,7% of bpost's share capital, via a private placement process (the "sale").

On December 16, 2013, Post Invest Europe S.à.r.l. notified that its shareholding in bpost SA-NV was below the 3% threshold. On 16 December 2013, Post Invest Europe S.à.r.l. holds 4.062 bpost shares with voting rights.

Million C	2013	2012	Evol. %
Turnover	2.239,5	2.270,2	$-1,4%$
Other operating income	35,5	21,1	68,2%
Total operating income	2.275,0	2.291,3	$-0,7%$
Materials cost	11,8	10,2	15,7%
Payroll costs	1.233,4	1.290,6	$-4,4%$
Services and other goods	556,8	580,2	$-4,0%$
Other operating expenses	11,6	46,2	$-74,9%$
Provision	$-13,6$	$-77,0$	$-82,3%$
Depreciation and amortization	66,8	71,1	$-6,0%$
Total operating expenses	1.866,8	1.921,3	$-2,8%$
Profit from operating activities (EBIT)	408,1	370,0	10,3%
Earnings before interests and taxes, depreciations and amortizations (EBITDA)	474,9	441,1	7,7%
Financial Revenues	13,0	16,3	$-20,2%$
Financial Costs	5,3	4,9	8,2%
Profit from ordinary activities	415,8	381,4	9,0%
Exceptional Revenues	8,2	14,5	$-43,4%$
Exceptional Costs	17,7	138,7	$-87,2%$
Income tax expense	158,1	85,4	85,1%
Earnings after Taxes	248,2	171,9	44,4%

Million C	2013	2012
Assets
Non-current assets
Intangible assets	24,3	34,0
Tangible assets	393,7	413,9
Financial assets	374,4	334,7
	792,4	782,6
Current assets
Long term receivables	0,0	0,0
Inventories	7,0	6,4
Trade and other receivables	347,0	340,3
Cash and cash equivalents	438,2	792,6
Deferred charges and accrued income	30,1	33,4
	822,3	1.172,7
Total assets	1.614,7	1.955,4
Equity and liabilities
Equity
Issued capital	364,0	508,5
Reevaluation surpluses	0,1	0,1
Reserves	50,8	102,4
Retained earnings	22,2	1,9
	437,1	612,9
Provisions
Pension related provisions	29,8	39,0
Provision for repairs and maintenance	1,8	2,4
Other liabilities and charges	160,6	289,3
	192,2	330,7
Non current liabilities
Long term debts	81,7	90,8
	81,7	90,8
Current liabilities
Trade and other payables	205,7	192,1
Social Debts payable Income tax payable	367,2 52,2	375,6 15,2
Other Debts
	151,3	180,7
Accrued charges and deferred income	127,3 903,7	157,3
		921,0
Total liabilities	1.614,7	1.955,4

Million €	Issued capital	Non- distributa ble reserves	Retained earnings	Other reserves	Reevaluat -ion surplus	Total
As per 1 January 2013	508,5	30,3	1,9	72,2	0,1	612,9
Addition	٠	÷	22,2	$\overline{\phantom{a}}$		22,2
Transfers
Reimbursement capital Extraordinary Dividends distribution	$-144.5$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$		$\omega^{\vee}$	$-144.5$
(Shareholders)	÷.	$-30,3$	$-1.9$	$-21,4$		$-53.6$
As per 31 December 2013	364,0	0,0	22,2	50,8	0,1	437,1

Million C	2013	2012	Evol C	Evol $\frac{9}{6}$
Sales	2.239,5	2.270.2	$-30,7$	$-1.4%$
Other Operating Income	35.5		14.4	68,0%
Operating Income	2.275,0	2.291,3	$-16.3$	$-0.7%$

Million C	2013	2012	Evol C	Evol. $\frac{9}{6}$
Domestic Mail	1.540,3	1.665,2	$-124.9$	$-7,5%$
Transactional Mail	961,3	982,7	$-21,5$	$-2,2%$
Advertising Mail	275,9	287,3	$-11,4$	$-4.0%$
Press	303,1	395,2	$-92,1$	$-23,3%$
Parcels	168,5	141,6	26,9	19,0%
Value Added Services	41,2	40,1	1,1	2,7%
International Mail	143,6	164,4	$-20,8$	$-12,6%$
Banking & Financial
Products	209,2	217,3	$-8,0$	$-3,7%$
Other	172,2	62,7	109,5	174,6%
Operating Income	2.275,0	2.291,3	$-16,3$	$-0,7%$

Operating expenses

bpost SA-NV operating expenses for 2013 slightly decreased compared to last year and amount to 1.866,8 million EUR (2012: 1.921,3 million EUR).

Materials costs, which include the cost of raw materials, consumables and goods for resale, increased by 1,6 million EUR to 11,8 million EUR.

The costs for goods and services showed a 4,0% decrease which can be split as follows:

Million C	2013	2012	Delta
Rent & Rental Costs	88,4	81,4	7,0
Maintenance and repairs	71,9	65,3	6,6
Energy delivery	40.0	42,3	$-2,3$
Other goods	14,9	16,4	$-1,5$
Postal and telecom costs	5,9	7,1	$-1,2$
Insurance costs	21,4	22,7	$-1,3$
Transport costs	114,4	119,7	$-5,3$
Publicity and advertising	20,3	25.1	$-4,8$
Consultancy	18,3	31.7	$-13,4$
Interims	28,1	39,3	$-11,2$
Third party renumeration, fees	115,5	110,5	5,0
Other services	17,7	18,8	$-1,1$
Total	556,8	580,2 $0.111111111111111111111111111111111111$	$-23,5$

Goods and Services evolution 2013-2012

• Rental costs went up by 7,0 million EUR or 8,6% due to the increase in lease costs for vans and the continuing shift from owned towards leased vehicles.
• Maintenance and repairs showed 10% increase from 65,3 million EUR to 71,9 million EUR. This was caused by the increase in maintenance costs of machines in sorting centers and banking software. In addition the maintenance costs of vehicles rose due to the fact that the average age of the van fleet is increasing. These negative impacts have been partly compensated by lower building-related costs.
• Energy costs declined by 2,3 million EUR mainly due to a positive price evolution for fuel costs for both vehicles and buildings.
• Transport costs amount to 114,4 million EUR, a decrease of 4,4% (5,3 million EUR) compared to previous year. This decrease was driven by the positive impact due to the reclassification of the favourable settlement of previous years' terminal dues in 2013 (9,2 million EUR) and by lower distribution costs due to lower mail volumes. These were partially offset by higher transport costs explained by higher volume related to international parcels.
• Publicity and advertising costs decreased from 25,1 million EUR to 20,3 million EUR (or 19,1%).

• Cost monitoring programs within the Company have also resulted in lower consultancy costs in comparison to 2012, generating a positive impact of 13,4 million EUR.

• The reduction in interim costs was driven by lower use of temporary personnel.

• Third party remunerations and fees climbed by 5,0 million EUR mainly because of additional external IT experts necessary for the development and implementation of new software applications.

Payroll costs amount to 1.233,4 million EUR in 2013 (2012: 1.290,6 million EUR) which represents a decrease of 57,2 million EUR or 4,4%.

The main positive evolutions in payroll cost are due to:

• The reduction of the average workforce of 1017 FTE's generating a saving of 48,4 million EUR driven by the various productivity enhancement projects. This reduction should be analyzed alongside the underlying decrease in the use of interims by 186 FTE's or 11,2 million EUR (reported under cost of goods and services). Reorganizations and productivity programs in the postal value chain activities (distribution, transport, collect), and in postoffices continued to be implemented alongside the optimization of the support activities such as Cleaning, Facility Management and Human Resources.
• The positive mix effect in payroll mainly driven by the recruitment of auxiliary postmen on lower salaries had an impact of 7,0 million EUR.
• The payment in 2012 of a consideration to certain categories of personnel in compensation for the termination of some Accumulated Compensated Absences (24,6 million EUR).
• Lower costs for early retirement and social plans for 6,1 million EUR.

These positive evolutions were partially compensated by the cost-of-living increases of March 2012 (full impact in 2013) and January 2013 (27,4 million EUR).

Besides this, merit increases, promotions and higher year-end premiums had a negative impact on the payroll costs for 8,4 million EUR.

Depreciation and amortization decrease to 66,8 million EUR (2012: 71,1 million EUR) or by 6,0%.

2013	2012	Delta
$-6,3$	$-19,0$	12,7
0,1	$-0,2$	0,3
$-2,9$	7,0	$-9,9$
1,9	$-20,2$	22,1
$-5,7$	$-34,9$	29,2
$-0,2$	$-0,3$	0,1
$-0,4$	$-9,3$	8,9
$-13.6$	-77.0	63,4

Million C	2013	2012	Delta
Exceptional Costs
Loss on/impairment of assets	5,9	9,1	$-3,2$
Write off subsidiaries	11,6	2,7	8,9
Others	0,2	126,9	$-126,7$
Total	17,7	138,7	$-121,0$
Exceptional Revenues
Reversal impairment assets	6,2		6,2
Reversal Write off subsidiaries		14,3	$-14,3$
Others	2,0	0,2	1,8
Total	8,2	14,5	$-6,3$

4.2. Balance Sheet

Assets

The balance sheet total amounts to 1.614,7 million EUR in 2013 (2012: 1.955,4 million EUR), a decrease of 340,7 million EUR versus 2012.

Intangible fixed assets decreased by 9,7 million EUR as the depreciations (11,9 million EUR) outpaced the additions (mainly related to investments in software and licenses).

Tangible assets declined by 20,2 million EUR. The main components of this variance are:

• $\bullet$ Investments for an amount of 42,4 million EUR (2012: 37,0 million EUR),
• More than compensated by the depreciation of 54,5 million EUR (2012: 63,2 $\bullet$ million EUR) and the transfer to assets held for sale of 8,3 million EUR.

Financial fixed assets increased to 374,4 million EUR (2012: 334,7 million EUR). This increase of 39,7 million EUR is mainly explained by :

• a capital increase of Deltamedia SA-NV for 3,5 million EUR,
• a capital increase of bpost bank for 37,5 million EUR,
• the purchase of the remaining 20% of the shares of Mail Services Incorporated to reach a total of 100% of the shares, as well as an adjustment related to 20% purchased in 2012, total impact amounts to 7,9 million EUR,
• during the year 2013 bpost SA-NV performed a capital increase in bpost US Holding throughout the incorporation of the shares of Mail Services Incorporated,
• a new loan of 2,3 million EUR towards Landmark Global, partially offset by,
• the impairment on the participations in Euro-Sprinters and Deltamedia for a total amount of 11,6 million EUR.

Trade receivables decreased by 1,1 million EUR, mainly due to a decline in the advances by foreign operators partially offset by an increase of the outstanding trade accounts receivables.

Other receivables increased by 7,9 million EUR mainly due to the advance paid in 2013 in anticipation to the acquisition of a 100% participation in Gout, a provider of services to the parcels industry based in the Netherlands and to the increased advances for family allowances.

Deferred charges and accrued income amount to 30,1 million EUR (2012: 33,4 million EUR).

Management Report 2013

The sum of cash and cash investments decreased to 438,2 million EUR (2012: 792,6 million EUR) mainly explained by the capital reduction paid out to shareholders (144,5 million EUR), the repayment of the overcompensation by the State for the SGEI (123,1 million EUR), the exceptional dividend payment (53,5 million EUR) and the advance on the 2013 dividend (186,0 million EUR) partly compensated by the operational free cash flow.

Liabilities

The equity decreased to 437,1 million EUR (2012: 612,9 million EUR). The addition of the 248,2 million EUR net profit for the 2013 period was more than compensated by the proposed dividend of 226,0 million EUR (out of which an interim dividend of 186 million EUR has been paid already), a capital decrease of 144,5 million EUR and the payment as an exceptional dividend for 53,6 million EUR.

Provisions for liabilities and charges decreased to 192,2 million EUR (2012: 330,7 million EUR). Mainly explained by:

• The utilization of the provision concerning the decision of the European Commission related to the compensation for services of general economic interest. The provision of 124,9 million EUR created in 2012, for the risk related to a possible over-compensation of the 2011 and 2012 periods, was used in 2013.
• Decrease of the pension related provision by 9,2 million EUR, due to:
• the end of career related provisions decrease by 6,3 million EUR (the utilizations for 18,2 million EUR are partially offset by set-up of new provision for the Collective Labor Agreement 2012);
• the Accumulated Compensated Absences provision decrease by 2,9 million EUR (utilizations).
• Provisions for major maintenance and repairs decreased by 0,6 million EUR to 1,8 million EUR mainly due to a reassessment.

Long-term financial debts amount to 81,7 million EUR (2012: 90,8 million EUR) and consist mainly of a bank loan concluded in 2007 with the European Investment Bank. The decrease is due to the reimbursement of 9,1 million EUR for this loan, which will be repaid in installments until 2022.

The trade payables amount to 168,4 million EUR (2012: 173,5 million EUR). Other payables, composed of the short-term debts and advances received, have increased by 18,7 million EUR due to advances received to fund State related transactions.

The social debts decreased by 8,4 million EUR to 367,2 million EUR (2012: 375,6 million EUR) mainly explained by the decrease of rest arrears (10,7 million EUR), partially compensated by the accrual for non recurring bonus (3,2 million EUR).

10. Management and remuneration

Reference Code and introduction

This Corporate Governance Statement contains the rules and principles by which bpost's corporate governance is organized, which are contained in relevant legislation (including Law of March 21, 1991 on the reform of certain economic public companies (the "Law of 1991"), the Articles of Association and the Corporate Governance Charter). As a limited liability company under public law pursuant to the 1991 Law, general Belgian company law applies to the Company, except to the extent that the 1991 Law or any other Belgian laws or regulations adopted pursuant thereto provide otherwise.

The Company adopted new Articles of Association at the Shareholders' Meeting held on May 27, 2013. Any changes to the Articles of Association approved by the Shareholders' Meeting of the Company must be approved by the Belgian State pursuant to the 1991 Law. The latest version of the Company's Articles of Association has been approved by Royal Decree dated June 7, 2013 and are in effect since June 25, 2013.

The main characteristics of bpost's governance model are the following:

• a Board of Directors that defines the general policy and strategy of bpost and supervises the operational management;
• a Strategic Committee, an Audit Committee and a Remuneration and Nomination Committee created within the Board to assist and make recommendations to the Board;
• a CEO who is responsible for the operational management and to whom the Board of Directors has delegated powers of day-to-day management;
• a Management Committee that exercises the powers entrusted to it by the Law of 1991, the Articles of Association and the Board of Directors;
• a Group Executive Management that assists the CEO in the operational management of the Company:
• a clear division of responsibilities between the Chairperson of the Board of Directors and the CEO.

bpost is committed to high standards of corporate governance and relies on the Belgian Code on Corporate Governance of March 12, 2009 (the "Corporate Governance Code") as a reference code. The Corporate Governance Code is based on a "comply or explain" approach. Belgian listed companies should follow the Corporate Governance Code, but may deviate from its provisions provided they disclose the justification for any such deviation. The Board of Directors has adopted the Corporate Governance Charter, effective since June 25, 2013.

As a state-owned enterprise, the Company also aims to comply with most of the OECD Guidelines on Corporate Governance of State-owned Enterprises laid down in the OECD Code, to the extent permitted under the legal framework that applies to bpost, in particular the 1991 Law.

BOARD OF DIRECTORS

COMPOSITION

Until June 25, 2013, the Board of Directors was composed of:

• Five directors, including the Chairperson of the Board of Directors (the category A directors), appointed by the Belgian State by Royal Decree deliberated in the Council of Ministers;
• Four directors (the category B directors) appointed by the other shareholders (i.e., all shareholders except the public authorities); and
• The CEO, who belongs to neither of the aforementioned categories, but is appointed by the Belgian State via Royal Decree deliberated in the Council of Ministers.

Until such date, the Board was composed of the following members:

• Martine Durez (A) (Chairperson)
• Arthur Goethals (A)
• Luc Lallemand (A)
• via. Laurent Levaux (A)
• Caroline Ven (A) $\blacksquare$
• Geert Duyck (B)
• K.B. Pedersen (B) $\sim$
• Søren Vestergaard-Poulsen (B) $\Delta$
• $\mathbf{r}$ Bjarne Wind (B)
• Johnny Thijs (Chief Executive Officer)

Since June 25, 2013, the Board of Directors consists of up to 12 members, appointed as follows:

• Up to six directors, including the Chairperson of the Board of Directors and one director proposed by SFPI/FPIM, are appointed by the Belgian State by Roval Decree deliberated in the Council of Ministers, upon proposal of the Board of Directors after advice of the Remuneration and Nomination Committee:
• Three independent directors, within the meaning set out in Article 526ter of the Belgian Companies Code, are elected by an electoral college consisting of all shareholders of the Company other than public institutions (meaning Belgian public institutions or entities within the meaning of Article 42 of the Law of 21 March 1991 ("Public Institutions"), which encompasses the Belgian State and its affiliated entities, including SFPI/FPIM), upon proposal of the Board of Directors after advice of the Remuneration and Nomination Committee, it being understood that, for the election of these directors, no shareholder may cast votes representing in excess of 5% of total voting rights attached to the shares emitted by the Company;
• So long as Post Invest Europe S.à.r.l. (alone or together with its affiliates) owns 15% or more of the shares with voting rights emitted by the Company, two directors are elected by an electoral college consisting of all shareholders of the Company other than Public Institutions upon the proposal of Post Invest Europe S.à.r.l. If Post Invest Europe S.à.r.l. (alone or together with its affiliates) owns 5% or more of the shares with voting rights emitted by the Company, but less than 15%, one director is so elected;
• If one or no directors have been appointed upon the proposal of Post Invest Europe S.à.r.l. in accordance with the above, the remaining director or directors are elected by an electoral college consisting of all shareholders of the Company other than Public Institutions, upon proposal of the Board of Directors after advice of the Remuneration and Nomination Committee; and

Management Report 2013

Name	Position		Director since	Mandate expires	Presence at meetings in $2013$ * )
Martine Durez $(^{1})(^{2})$	Chairperson Non-Executive the Board	of	2006	2018	21/21
Johnny Thijs (1)	CEO and Director		$2000(^{3})$	$2014$ ( $^{3}$ )	30/30
Arthur Goethals (1)	Non-Executive Director		2006	2018	16/21
Luc Lallemand (1)	Non-Executive Director		2002	2018	17/21
Laurent Levaux (1)	Non-Executive Director		2012	2018	10/17
Caroline Ven (1)	Non-Executive Director		2012	2018	18/22
K.B. Pedersen $(1)$	Non-Executive Director		2009	2018	15/17
Bjarne Wind (1)	Non-Executive Director		2008	2018	27/27
François Cornelis	Independent Director		2013	2019	9/11
Sophie Dutordoir	Independent Director		2013	2019	11/11
Bruno Holthof	Independent Director		2013	2019	9/11

POWERS AND FUNCTIONING

Powers and responsibilities of the Board

The Board of Directors is vested with the power to perform all acts that are necessary or useful for the realization of the Company's purpose, except for those actions that are specifically reserved by law or the Articles of Association to the Shareholders' Meeting or other management bodies.

In particular, the Board of Directors is responsible for:

• defining the general policy orientations of the Company and its subsidiaries:
• $\overline{\bullet}$ deciding all major strategic, financial and operational matters of the Company;
• overseeing the management by the CEO, the Management Committee and the Group Executive Management; and
• all other matters reserved to the Board by the Belgian Companies Code or the 1991 Law.

Certain decisions of the Board must be adopted by a special majority (see below). Within certain limits, the Board of Directors is entitled to delegate part of its powers to the Management Committee and to delegate special and limited powers to the CEO and other members of the Group Executive Management.

Functioning of the Board

In principle, the Board of Directors meets seven times a year, and in any event no fewer than five times a year. Additional meetings may be called with appropriate notice at any time to address specific needs of the business. A meeting of the Board of Directors must in any event be convened if so requested by at least two directors. In 2013, the Board met 16 times.

Quorum

The Board can only deliberate and make valid decisions if more than half of the directors are present or represented. The quorum requirement does not apply (i) to the vote on any matter at a subsequent meeting of the Board of Directors to which such matter has been deferred for lack of quorum at a prior meeting, if said subsequent meeting is held within 30 days from such prior meeting and the notice of said subsequent meeting sets forth the proposed decision on such matter with reference to this provision, or (ii) when an unforeseen emergency arises that makes it necessary for the Board to take action that would otherwise become time-barred by law or in order to avoid imminent harm to the Company.

Deliberation and voting

Pursuant to the Law of 1991, the following decisions require a two-thirds majority:

• the approval of all renewals or amendments to the Management Contract:
• the acquisition of participations in companies, associations and institutions that exceed one of the thresholds laid down in Article 13, §2, paragraph one, of the Law of 1991.

Furthermore, certain decisions within the competence of the Board as provided under Article 29, §2 of the Articles of Association require also a majority of twothirds of the votes cast.

Without prejudice to these special majority requirements set forth above, all decisions of the Board of Directors are adopted by a majority of the votes cast. In the case of a tie, the Chairperson has a casting vote.

In addition, the Corporate Governance Charter provides that Board decisions of strategic import, including the adoption of the business plan and the annual budget and decisions regarding strategic acquisitions, alliances and divestitures must be prepared by a standing or an ad hoc Board committee. For any such decisions, the Board shall strive to achieve broad support across its various constituencies, it being understood that, following appropriate dialogue and consultations, the Chairperson may call for a decision and the proposal shall carry if adopted by a majority of the votes cast.

CORPORATE GOVERNANCE CHARTER

The Board of Directors has adopted the Corporate Governance Charter, effective since June 25, 2013. The Corporate Governance Charter has been amended once since its adoption further a decision of the Board of Directors dated November 7, 2013 (see next section). The Board of Directors will review the Company's corporate governance at regular intervals and adopt any changes deemed necessary and appropriate.

The Corporate Governance Charter contains rules with respect to:

• The duties of the Board of Directors and the Committees on the one hand and of the
• Management Committee, Group Executive Management and the CEO on the other;
• The responsibilities of the Chairperson and the Corporate Secretary;
• The requirements with which the members of the Board of Directors need to comply in order to ensure that they have the adequate experience, expertise and competences to fulfill their duties and responsibilities;
• A system of disclosure regarding mandates held and rules aimed at avoiding conflicts of interests and providing guidance on how to inform the Board in a transparent way in case such conflicts occur. The Board may decide to exclude the member who has a conflict of interest from the deliberations and vote on that subject.

The Board continuously evaluates and improves its functioning in order to steer the Company ever better and more efficiently.

In 2013, an induction program has been provided to newly appointed directors aimed at acquainting them with the activities and organization of the Company as well as with the rules laid down in the Corporate Governance Charter. This program is open to every director who wishes to participate. It includes visiting operational and sorting centers.

Transactions between the Company and its Board members and executive managers

A general policy on conflicts of interest applies within the Company and prohibits any situation of conflict of interests of a financial nature that may affect the personal judgment or professional tasks of a director to the detriment of bpost's group.

In accordance with Article 523 of the Belgian Companies Code, Mr. Johnny Thijs declared to have a conflict of interest in connection with the Employee Offering, item of the Board of Directors' meeting of May 17, 2013. Under the Employee Offering, management was entitled to acquire bpost's shares, within a tranche reserved to said management, at a discount available to employees and representing 16.67% compared to initial public offering price. He informed the Company's auditors of this conflict of interest and decided not to participate in the deliberation or voting on this item.

In accordance with Article 523 of the Belgian Companies Code, Mr. Johnny Thijs declared to have a conflict of interest in connection with the discussions on the renewal of its mandate as CEO of the Company (and related discussions on contractual terms), item of the Board of Directors' meeting of May 17, 2013 and December 4, 2013. He informed the Company's auditors of this conflict of interest and decided not to participate in the deliberation or voting on this item.

In addition, in a limited number of cases, one or the other member of the Board has preferred, in light of functional conflict of interests, to abstain from participating in debated and in voting.

On November 7, 2013, the Board of Directors adopted a policy, annexed to the Corporate Governance Charter, which governs decisions relating to the Management Contract or any contract to be entered between the Company or its affiliated companies and the Belgian State. Under the circumstances laid down in said policy, transactions entered between the Company or its affiliated companies and the Belgian State remain subject to the application of the procedure laid down in Article 524 of the Belgian Companies Code.

Committees of the Board of Directors

The Board of Directors has established three Board committees, which are responsible for assisting the Board of Directors and making recommendations in specific fields: the Strategic Committee, the Audit Committee (in accordance with Article 526bis of the Belgian Companies Code) and the Remuneration and Nomination Committee (in accordance with Article 17, §4 of the 1991 Law and Article 526quater of the Belgian Companies Code). The terms of reference of these Board committees are primarily set out in the Corporate Governance Charter.

Strategic Committee

The Strategic Committee advises the Board of Directors on strategic matters and shall, in particular:

• review from time to time industry developments, the objectives and strategies of the Company and its subsidiaries and recommended corrective actions;
• review the draft of the business plan submitted each year by the Management Committee;

Management Report 2013

Audit Committee

The Audit Committee advises the Board on accounting, audit and internal control matters, and shall, in particular:

• review accounting policies and conventions;
• review the draft annual accounts and examine whether the proposed ÷ distribution of earnings and profits is consistent with the business plan and the observance of applicable solvency and debt coverage ratios;
• review the draft annual budget submitted by the Management Committee and monitor compliance with the budget in the course of the year;
• review the quality of financial information furnished to the shareholders and $\ddot{\phantom{1}}$ the market:
• monitor and oversee the internal audit process, internal controls and risk management, including for the Company and its subsidiaries as a whole;
• propose candidates for the two statutory auditors to be appointed by the Shareholders' Meeting to the Board of Auditors;
• monitor the statutory audit of the annual and consolidated accounts, including any follow-up on any questions and recommendations made by the external auditors: and
• review the external audit process and monitor the independence of the statutory auditors and any non-audit services rendered by them.

Until June 25, 2013, the Audit Committee was composed of Bjarne Wind (Chairperson), Geert Duyck, Luc Lallemand and Caroline Ven.

Since June 25, 2013, the composition of the Audit Committee has been set as follows: (i) three independent directors; (ii) one director appointed by the Belgian state; and (iii) either (a) another director appointed by the Belgian state or (b) so long as Post Invest Europe S.à.r.l. (alone or together with its affiliates) owns at least 15% of the shares with voting rights, one director appointed upon the proposal of Post Invest Europe S.à.r.l. The Chairperson of the Audit Committee is designated by the Board of Directors but shall not be the Chairperson of the Board of Directors. No executive director (including the CEO) shall be a member of the Audit Committee.

The Audit Committee was, at December 31, 2013, composed of François Cornelis (Chairperson), Sophie Dutordoir, Bruno Holthof, Caroline Ven and Bjarne Wind.

The Audit Committee met seven times in 2013.

Remuneration and Nomination Committee

The Remuneration and Nomination Committee advises the Board principally on matters regarding the appointment and remuneration of directors and senior management and shall, in particular:

• identify and nominate, for the approval of the Board, candidates to fill vacancies as they arise, taking into account the 1991 Law. In this respect, the Remuneration and Nomination Committee shall consider proposals made by relevant parties, including shareholders;
• advise on proposals for appointment originating from shareholders;
• advise the Board of Directors on its proposal to the Belgian government for the appointment of the CEO and on the CEO's proposals for the appointment of other members of the Management Committee and of the Group Executive Management:
• advise the Board of Directors on the remuneration of the CEO and the other members of the Management Committee and of the Group Executive Management and arrangements on early termination;
• review any share-based or other incentive scheme for the directors, members of the Management Committee, members of the Group Executive Management and employees;
• establish performance targets and conduct performance reviews for the CEO and other members of the Management Committee and of the Group Executive Management:
• advise the Board of Directors on the remuneration of the directors: and
• submit a remuneration report to the Board of Directors.

Until June 25, 2013, the Remuneration and Nomination Committee was composed of Martine Durez (Chairperson), Geert Duyck, Arthur Goethals and Bjarne Wind.

Since June 25, 2013, the composition of the Remuneration and Nomination Committee has been set as follows: (i) three independent directors; (ii) one nonexecutive director appointed by the Belgian state, who chairs the Remuneration and Nomination Committee; and (iii) either (a) another non-executive director appointed by the Belgian state or (b) so long as Post Invest Europe S.à.r.l. (alone or together with its affiliates) owns at least 15% of the shares with voting rights, one director appointed upon the proposal of Post Invest Europe S.à.r.I. The CEO participates with an advisory vote in the meetings of the Remuneration and Nomination Committee when the remuneration of the other members of the Management Committee is being discussed.

The Remuneration and Nomination Committee was, at December 31, 2013 composed of Martine Durez (Chairperson), Sophie Dutordoir, François Cornelis, Bruno Holthof, and Bjarne Wind.

The Remuneration and Nomination Committee met 5 times in 2013.

Name	Function
Johnny Thijs	Chief Executive Officer
Mark Michiels	Human Resources and Organization
Pierre Winand	Chief Financial Officer Service Operations and ICT

Name	Function
Kurt Pierloot	Mail Service Operations
Peter Somers	Parcels and International
Koen Van Gerven	Mail and Retail Solutions

d'Entreprises/Instituut van de Bedrijfsrevisoren), De Kleetlaan 2, 1831 Diegem, Belgium;

• PVMD Bedrijfsrevisoren-Reviseurs d'Entreprises SC SCRL ("PVMD"), represented by Mr. Lieven Delva (member of the Institut des Réviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren), Rue de l'Yser 207, 4430 Ans, Belgium;
• Mr. Philippe Roland, Member of the Court of Audit (Rekenhof/Cour des Comptes) and First President of the Court of Audit, Rue de la Régence 2, 1000 Brussels, Belgium; and
• Mr. Jozef Beckers, Member of the Court of Audit (Rekenhof/Cour des Comptes), Rue de la Régence 2, 1000 Brussels, Belgium.

The mandates of Mr. Philippe Roland and Mr. Josef Beckers which were due to expire on September 30, 2013 have been renewed a new term of three years. The mandates of Ernst & Young and PVMD will expire at the annual Shareholders' Meeting in 2015.

Ernst & Young and PVMD are responsible for the audit of the consolidated financial statements of the Company. For the year ended December 31, 2013 Ernst & Young and PVMD received 325,000 EUR (excluding value added tax) in fees for the audit of the financial statements of the Company and its subsidiaries and 73.500 EUR (excluding value-added tax) in fees for non-audit services. The other members of the Board of Auditors received 55.803 EUR in remuneration for their services in connection with the audit of the non-consolidated financial statements of the Company for the year ended December 31, 2013.

GOVERNMENT COMMISSIONER

The Company is subject to the administrative supervision of the Belgian Minister responsible for public enterprises who exercises such control through a Government Commissioner. The role of the Government Commissioner is to ensure compliance with the requirements of Belgian law, the Articles of Association and the Management Contract. In addition, the Government Commissioner reports to the Minister of the Budget on all decisions of the Company having an impact on the Belgian state's budget.

The Government Commissioner is Mr. Luc Windmolders and his substitute is Mr. Marc Boeykens.

LEGAL AND SHAREHOLDING STRUCTURE

The Company's shares are registered or dematerialized. At December 31, 2013, the share capital of the Company was represented by 200,000,944 shares. Each share entitles its holder to one vote. The shares are listed on the NYSE Euronext Brussels.

On June 26, 2013, Post Invest Europe S.à.r.l. notified that its shareholding in the Company was above the 15% threshold. With 35.599.008 bpost shares in its possession on June 21, 2013, Post Invest Europe S.à.r.l. had participation of 17,80% of the shares with voting rights emitted by bpost. On December 16, 2013, Post Invest Europe S.à.r.I. further notified that its shareholding in the Company was below the 3% threshold. At that date, Post Invest Europe S.à.r.l. held 4.062 bpost shares with voting rights.

REMUNERATION REPORT

Declaration relating to the remuneration policy

As a limited liability company under public law and in compliance with applicable Corporate Governance requirements, bpost has developed a specific remuneration policy, decided by the Board of Directors upon recommendation of the Remuneration and Nomination Committee. The remuneration policy takes into account the different groups of employees of the Company and is regularly assessed and updated if and when appropriate. Any change in this policy is approved by the Remuneration and Nomination Committee.

The remuneration policy aims to offer an equitable reward package to all employees and directors, which is competitive with the Belgian reference market. The total reward package aims to a well-balanced mix of financial and non-financial elements. To that effect, a yearly comparison of the various compensation elements to the median of the Belgian reference market is carried out.

Furthermore, in order to achieve sustainable and profitable growth, performance at both collective and individual level are rewarded. Such reward system has the ambition to be an affordable and easy to understand system that is linked to corporate results, i.e. EBIT & Customer Loyalty and that allows differentiation at individual level in view of performance and talent. At the same time, it aims to create sustainable long term value.

The Company considers that a transparency communication on the principles and implementation of the remuneration policy is essential.

In general, bpost distinguishes different groups, for which the basis remuneration principles will be explained and detailed:

• 1. members of the Board of Directors;
• 1. CEO:
• 1. other members of the Management Committee and of the Group Executive Management.

Members of the Board of Directors

The remuneration of the members of the Board of Directors was decided by the Shareholders' Meeting of April 25, 2000.

Pursuant to that decision, the members of the Board of Directors (with the exception of the CEO) are entitled to receive the following gross annual remuneration:

• 38.772,56 EUR for the Chairperson, who also chairs the Joint A Industrial Committee (Paritair Comité / Commission Paritaire) of bpost:
• 19.386,28 EUR for the other directors, with the exception of the CEO.

These amounts are indexed annually.

Pursuant to the abovementioned decision of the Shareholders' Meeting April 25, 2000, the members of the Board of Directors (with the exception of the CEO) are entitled to an attendance fee of 1.600,94 EUR (which as a result of indexation has increased to 1.618,44 EUR per meeting effective March 1, 2013) for attendance at one of the committees established by the Board of Directors.

Management Report 2013

No other benefits are paid to the members of the Board of Directors for their mandate as director.

Messrs. Søren Vestergaard-Poulsen and Geert Duyck have waived their right to the remuneration and attendance fees linked to their positions as a Board member.

During the financial year, the members of the Board of Directors received the following total gross annual remuneration:

Member	Board meetings	Audit Committee	Strategic Committee	Remuneration & Nomination Committee	TOTAL
Martine Durez	38.772.56 EUR	Not a member	Not a member	8.092.20 EUR	46,864,76 EUR
Arthur Goethals	19.386.28 EUR	Not a member	0 EUR	4.855.32 EUR (1)	24.241.60 EUR
Luc Lallemand	19.386.28 EUR	6,473.76 EUR	1.618.44 EUR	Not a member	27.478.12 EUR
Laurent Levaux	19.386,28 EUR	Not a member	1.618.44 EUR	Not a member	21.004.72 EUR
Caroline Ven	19.386,28 EUR	8.092.20 EUR	Not a member	Not a member	27.478,48 EUR
Bjarne Wind	19,386,28 EUR	9.710.64 EUR	Not a member	8.092.20 EUR	37.189.12 EUR
K.B. Pedersen	19.386,28 EUR	Not a member	1.618,44 EUR	Not a member	21.004.7 2 EUR
François Cornelis (°)	11.329.08 EUR	3.236,88 EUR	Not a member	0 EUR	14.565,96 EUR
Sophie Dutordoir (3)	11,329,08 EUR	3.236,88 EUR	Not a member	1.618,44 EUR	16.184,40 EUR
Bruno Holthof ( 3 )	11.329,08 EUR	1.618.44 EUR	Not a member	1.618.44 EUR	14,565,96 EUR
Geert Duyck	0 EUR	0 EUR	Not a member	0 EUR	0 EUR
Vestergaard- Søren Poulsen	0 EUR	Not a member	0 EUR	Not a member	0 EUR

(1) Arthur Goethals was member of the Remuneration and Nomination Committee until 25 June 2013.

(2) Luc Lallemand was member of the Audit Committee until 25 June 2013 and became member of the Strategic Committee as from same date.

$(3)$ Appointed as independent directors as from 25 June 2013.

Remuneration of the CEO

The remuneration package of the CEO is reviewed annually by the Board of Directors upon recommendation of the Remuneration and Nomination Committee and is based on a market comparison with large Belgian companies.

For the year ending December 31, 2013, a remuneration of 1.176.132 EUR was paid to the CEO (compared to 1.123.209 EUR for the year ended December 31, 2012) and can be broken down as follows:

• base salary (gross remuneration): 788.212 EUR;
• variable remuneration (performance driven bonus paid in cash): 322.804 . EUR (relating to the performance in 2012);
• pension and death in service coverage: 61.816 EUR;
• other compensation components (representation allowances): 3.300 EUR.

The CEO also benefits from the use of a company car for which the leasing costs was 23.960 EUR for the year.

No stock options were awarded in 2013 to the CEO and no options under previous stock option plan where still outstanding for exercise in 2013.

The remuneration package of the other members of the Management Committee and Group Executive Management is reviewed annually and approved by the Board of Directors upon recommendation of the Remuneration and Nomination Committee and is based on a benchmark exercise comparing bpost with large Belgian companies.

The objective of bpost is to offer a total remuneration package which is in line with the median of the 'reference market', being understood that remuneration packages are set on a function level rather than on an individual basis.

To date, no fundamental changes to the policy are foreseen for the next two years.

The different elements of the remuneration package are:

Base salary

The base salary is benchmarked with other large Belgian companies, in line with the above principles.

The individual base salary is based on:

• Function:
• Relevant experience; ¥
• Performance and competencies.

The performance of each individual is reviewed annually in a "Performance Management Process" (PMP).

Variable salary

A variable salary may be granted, based on the achievement of:

• corporate objectives;
• individual objectives.

The target variable salary is set as a percentage of annual base salary.

bpost uses a multiplication system whereby the actual variable salary paid out can vary depending on the corporate and individual performance and competencies.

The current remuneration policy does not provide for a specific contractual claw back stipulation in favour of the Company for the variable remuneration accorded on the basis of incorrect financial information.

Other benefits

bpost offers other benefits, such as pension, death and disability insurance, hospitalization insurance, company car, etc. These benefits are benchmarked regularly and adapted according to Belgian practices. Some of the benefits such as company car can vary according to the function. During 2013, no stock option plan has been introduced.

For the year ending December 31, 2013, a global remuneration of 3.356.613 EUR was paid to the members of the Group Executive Management, other than the CEO (compared to 3.258.115 EUR for the year ended December 31, 2012) and can be broken down as follows:

84/95

Management Report 2013

INTERNAL CONTROL AND RISK MANAGEMENT

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS IN RELATION TO THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The following description of bpost's internal control and risk management activities is a factual description of the activities performed. The description uses the structure recommended by the Commission Corporate Governance.

Control environment

The control environment with regards to the preparation of the consolidated financial statements is organized through several functions.

The accounting and control organization consists of three levels: (i) the accounting team in the different legal entities responsible for the preparation and reporting of the financial information, (ii) the business controllers at the different operating units of the organization responsible inter alia for the review of the financial information in their area of responsibility, and (iii) the Group Finance Department, responsible for the final review of the financial information of the different legal entities and operating units and for the preparation of the consolidated financial statements.

Next to the structured controls outlined above, bpost's external auditors perform independent interim and year-end control procedures on the financial statements.

The Internal Audit Department conducts a risk based audit program to provide assurance on the internal control effectiveness and risk management in the different processes at legal entity level.

Risk assessment

Appropriate measures are taken to ensure a timely and qualitative reporting and to reduce the potential risks related to the financial reporting process, including: (i) careful and detailed planning of all activities, including owners and timings, (ii) guidelines which are communicated by Group Finance to the various participants in the process prior to the closing, including relevant points of attention, and (iii) follow-up and feedback of the timelines, quality and lessons learned in order to strive for continuous improvement. A quarterly review takes place of the financial results which are reviewed in details by Management and are presented to and reviewed by the Audit Committee. A half-year review of the financial results is also performed which are reviewed by and discussed with the Statutory Auditor. Material changes to the accounting principles are coordinated by the Group Finance Department, reviewed by the Statutory Auditor, approved by the Audit Committee, and by the Board of Directors of bpost. Material changes to the statutory accounting principles of bpost or of other group companies are approved by the relevant Boards of Directors.

Control activities

The proper application by the legal entities of the accounting principles as described in the notes to the financial statements and as communicated to them by the Group Finance Department, as well as the accuracy, consistency and completeness of the