Proximus SA — Remuneration Information 2011

Mar 18, 2011

Annex 4

Remuneration report

Year 2010

Executive remuneration

The new corporate governance law of April 6, 2010 imposes listed companies to publish a remuneration report and describes the elements that should be included in the annual report. The Corporate Governance Committee has drawn up an update of the implementation quidelines replacing the 2009 guideline based on the Principle 7 of the Corporate Governance Code 2009. In advance of the legal obligation, Belgacom group has decided to substantially comply with the new guidelines - which entail greater transparency over executive remuneration - in its 2010 annual report.

Remuneration Policy

Belgacom has an advanced and innovative remuneration policy which is regularly assessed and updated through close cooperation with external Human Resources fora and universities.

The Belgacom remuneration policy aims at offering fair remuneration both to civil servants and to the group's contractual employees, taking into account the performance of the employee and of the company. The evolution of total remuneration is linked to the results of the company.

Because of Belgacom's history as a public-service company, there are some differences in its dynamics and structure, compared to the private sector. This has a major influence on how its remuneration policy has evolved. Belgacom Human Resources developed creative and adaptable programs to deal with its obligations related to the statutory employment status of some of its workforce, and introduced new elements that harmonised policies between civil servants and contractual employees. Some powerful private sector instruments were introduced, such as performance differentiation, job classification, employee engagement and variable pay. These were superimposed on the traditional payment rules linked to statutory employment.

Belgacom also maintains - and modernises - powerful public sector instruments, such as work-life benefits and social assistance. It is the responsibility of the Belgacom work-life department to combine the needs and responsibilities of employees and their families with those of the company and society as a whole. Over the years it has won several awards, including the "Family Friendly Firms" prize, awarded by the "Ligue des Familles", in 2007. This recognised the efforts of Belgacom to create a balanced working environment for its staff. The public-sector component is also an important tool in branding in employment terms. The objective of Belgacom is to treat all employees equally and to create a working environment in which any differences are acceptable to employees.

The remuneration policies of Belgacom employees are determined in a process of full dialogue with the board of directors and the social partners.

Executive Remuneration Policy

Belgacom has developed an executive remuneration policy which rewards executives competitively and at rates which are attractive in the market, aligning the interests of management and of shareholders.

The company wants to attract, retain and provide incentives for top executives, for its Management Committee and for its senior management. Belgacom wants its top executives to be clear role models, with a commitment to high performance and the company values.

The top executives are covered by dedicated reward programs which focus on the principles of Belgacom strategy to consistently reward high performance by individuals and by the company. To distinguish itself from other employers, Belgacom seeks to excel in the total package it offers. by providing not only cash but also numerous benefits. A fundamental principle of its remuneration policy is a degree of freedom for executives in choosing how they are to be rewarded.

The company wants to position top executive pay towards the median in the market for base salaries, and towards the upper quartile for total remuneration when there has been sustained excellent performance.

The policy aims to ensure that top performers can benefit from the growth of the company through long-term incentive plans.

The Nomination & Remuneration Committee sets the remuneration policy for top executives and decides the individual packages for the President & CEO and the members of the Management Committee. These are regularly verified by benchmarking executive pay against both the BEL 20 companies and a set of peer companies in the ICT sector, both in Belgium and in Europe.

The remuneration policy does not contain claw back stipulations concerning the variable remuneration of executive managers in favour of the company except for the various legal clauses applicable (law of July 7, 1978, April 12, 1965 and February 10, 2003 concerning the claw back possibilities for employees in case of fraud, serious fault and usual minor fault).

The relationship between the distinct remuneration components of the Belgacom Management Committee members and the President & CEO is illustrated in the figures below (figure 1).

Figure 1: Relative importance of the various components of remuneration (KPI's 100% at target).

Overview of executive remuneration

Remuneration earned by the CEO and the members of the Management Committee for the reported year

Base salaries of the Management Committee are reviewed annually by the Nomination & Remuneration Committee, based on an extensive review of performance and potential assessment provided by the President & CEO, as well as on external benchmarking data.

Annual variable pay is calculated in relation to performance against Key Performance Indicators set by the Board of Directors upon advice of the Nomination & Remuneration Committee. For 2010, these performance indicators included financial indicators as well as non-financial indicators, at both Group and Business Unit level. The achievement of these KPI's are followed-up

and communicated regularly. The results are based on audited financial figures and non-financial indicators measured by internal and external agencies specialised in market and customer intelligence of which the processes are audited on a regular basis.

The most important key financial indicator used is the operational cash flow. Important nonfinancial indicators included are the "care and ease" indicator and the "emplovee lovalty index". The "care and ease" indicator supports the ambition of Belgacom to offer superior service to each customer (care) and to re-introduce a culture of superior process quality (ease). The "care indicator" measures the end-to-end satisfaction of our customers. The "ease indicator" measures operational excellence in our customer interactions: the "First Time Right" principle. Measurements are made regularly of all interactions and channels with customers.

Figure 2: Information about the "Care and Ease indicator".

Another operational indicator is the "employee loyalty index", which each year measures emplovees' organisational commitment and job engagement, through a survey they filled in themselves. This is used as a starting point for further action.

The "Short-Term Incentives Plan" offers the executive on a regular basis a choice between several pay formulas. The current options are cash, a complementary pension fund, and a "Share Purchase Plan" - or a combination.

The Belgacom Group variable pay system reflects the group values, emphasizes the strengths of the Business Units, and creates incentive for individual performance.

Figure 3: The Belgacom Management Committee policy takes into account Group, Business Unit and Individual performance.

The table below reflects remuneration and other benefits granted directly or indirectly to the members of the Belgacom Management Committee in 2010 by Belgacom or any other undertaking belonging to the Belgacom Group (benefit based on gross or net remuneration. depending on the type of benefit).

The year-on-year evolution of the figures is the consequence of mainly:

• The full year impact of the new contract granting a new six-year mandate to the President & CEO as from March 2009:
• The full year impact of BMC members Grégoire Dallemagne and Michel De Coster and the departure in September 2010 of Michel De Coster.
• The strongly improved performances against the Key Performance Indicators driving variable remuneration related to 2009 paid in 2010 compared to the amount of 2008 paid in 2009.

Remuneration	President & CEO		Other members of the Management Committee
	2009	2010	2009	2010
Basic remuneration	985.721	914.708	2.647.391	2.608.943
Short term variable remuneration	481.428	736.046	1.006.460	2.226.448
Long term Share-based variable remuneration	475.972	465.006	906.246	1.116.018
Group insurance premiums	106.860	108.301	551.881	510.295
Other benefits	10.177	9.732	206.056	185.555
TOTAL (excl. employer's social contribution)	2.060.158	2.233.793	5.318.034	6.647.259
TOTAL (incl. employer's social contribution)	2.403.386	2.561.455	5.858.722	7.718.257

For convenience, we restated the figures of 2009 following the new disclosure quidelines.

Table 1: Overview basic and variable remuneration CEO and other members of the Management Committee.

Contractual arrangement of President & CEO

In March 2009 Didier Bellens started the first year of his new six-year mandate as President & CEO. He has a contract as a self-employed executive. Nevertheless he is subject to employee social security charges, in line with Article 11 § 1 of the Royal Decree of November 28, 1969.

This article states that "the application of the law on the social security system for employees is expanded/extended to those institutions of public utility and autonomous public enterprises as well as such individuals who, in their capacity of agent and against remuneration, devote their principal activity to the day-to-day management or direction of these institutions and enterprises. to the extent no statutory pension regime is applicable to these individuals".

Basic remuneration

The basic remuneration comprises the base salary earned in the position of the CEO and the members of the Management Committee for the reported year. The President & CEO, Didier Bellens, is also a non-remunerated member of the Board of Directors. During 2010 the President & CEO did not receive a merit. The members of the Management Committee were granted on average an increase in line with the overall merit granted to employees within the Belgacom Group.

Short term variable remuneration

The short term variable remuneration includes the actual bonus paid in the reported year 2010, for performance year 2009, through one of the options of the "Short Term Incentive Plan". The CEO and the members of the Management Committee can choose to receive the bonus in cash, or under the "Share Purchase Plan" or complementary pension plan.

The Discounted Share Purchase Plan provides the right to buy allocated shares at a 16.67% discount. The price of the shares is determined by the price in April each year. The shares are treasury shares and are blocked for a period of two years. The employee himself finances 83.33% of the full share purchase price. The discount is financed by the employer.

The President & CEO chose to receive his bonus through a "Share Purchase Plan". The other members of the Management Committee have chosen different options.

Long term Share-based variable remuneration

On an annual basis the members of the Management Committee may also receive a stock-option grant. The options issued under this plan are subscription rights, each giving the right (for a limited period) to acquire Belgacom shares at a price equal to the value of the share at the time of grant of the options.

On an individual basis, the Management Committee received the options mentioned in the table below. Grants for the reported year vest in equal annual instalments of one third over a threeyear period following the grant date, and can be exercised within a period of seven years. To comply with the new law on corporate governance the regulation of the Long Term Incentive plan is modified as of stock options grant in 2011 (for more details, see "Future remuneration policy").

Early 2009, the Belgian government approved a law permitting the extension, under certain conditions, of certain stock options. Since Belgacom Group's "Long-Term Incentive Plan" falls within the scope of this extension, the Board of Directors of Belgacom decided to offer the opportunity of an extension of life of five years for the stock options granted between 2004 and 2008 included to all Group employees holding such stock options within the conditions of this law. As a consequence, the life of stock options held by the President & CEO and the members of the Management Committee has been extended within the limitations of the law.

					Didier	Scott	Grégoire	Michel	Astrid DE	Michel		Ray
					BELLENS	ALCOTT	DALLEMAGNE		DE COSTER LATHAUWER	GEORGIS		STEWART
OPTIONS STOCK	Stock options remaining from previous years:				479.389	142.890	83.873	82,838	117.493	109.560		202.980
		granted during	g	l Number	108.621	37.375	37.375	35.039	34.105	46.719		70.078
			Sec rear	Exercise price (in EUR)	26,445€ 26,445€		26,445€	26,445€	26,445€	26,445€		26,445€
	exercised	during		l Number	162.744	34.264	9.625	6.470	12.193	12.240	7.718	30.606
			Ted Da ទិ	Year of grant of options exercised	2004	2004	2009	2009	2004	2005	2006	2004
	lapsed		E	Number			CONTRACTOR
		during	report year	Year of grant of options lapsed
	TOTAL		425.266 146.001		111 623	111.407	139.405	136.321		242.452

Table 2: Overview of stock option plan: President & CEO and other members of the Management Committee.

Extra-legal pension

The President & CEO participates in a complementary pension scheme which foresees an annual indexed contribution of EUR 75.624,83. The current members of the Management Committee have a "Defined Benefit Plan".

Other benefits

Belgacom Group wants to stimulate its executives by offering a portfolio of benefits and advantages that are competitive in the market place. The President & CEO and the other members of the Management Committee receive benefits on top of their remuneration, including medical insurance, car and other benefits in kind.

Main provisions of the contractual relationship

The President & CEO is bound by a non-competition clause, prohibiting him for 12 months from working for a competitor of Belgacom Group in Belgium and in those countries where Belgacom Group generates at least 5% of its consolidated revenues. He will receive an amount equal to one year's salary as compensation.

The members of the Management Committee, who are bound by a non-competition clause prohibiting them for 12 months from working for any other mobile or fixed licensed operator active on the Belgian market, will receive an amount equal to six months' salary as compensation.

Didier Bellens and Ray Stewart have a contractual termination clause with an indemnity of one vear's remuneration.

Scott Alcott, Grégoire Dallemagne and Michel Georgis have a contractual termination clause with an indemnity of one year's remuneration plus one month pay per year of seniority acquired, with a maximum of two years' remuneration after 12 years of service.

Astrid De Lathauwer has a contractual termination clause with an indemnity of one year's remuneration plus one month pay per year of seniority acquired.

Michel De Coster was paid an indemnity in execution of his contractual termination clause. The indemnity amounted to one year's remuneration plus one month pay per year of seniority acquired, resulting in a 14 months indemnity pay.

Bart Van Den Meersche has a contractual termination clause with an indemnity of one year's remuneration, compliant with the new corporate governance law.

Future remuneration policy

Belgacom has a balanced executive remuneration policy which rewards executives competitively and at rates which are attractive in the market, aligning the interests of management and shareholders. It is build upon fixed components (base salary + benefits $\&$ perks) and variable performance based components, being the short term incentive plan (STIP) and the long term incentive plan (LTIP).

In the frame of the application of the new corporate governance law the Board of Directors has approved the proposal of the Nomination & Remuneration Committee to manage the impact on the CEO and BMC members' remuneration policy as follows:

The Short Term Incentive plan and the Long Term Incentive plan will be rebalanced in order to obtain an equal weight between payment after 1 year and deferred payment.

The Long Term Incentive plan regulation for the CEO and the other members of the Belgacom Management Committee will be changed as from the grant received in 2011 on the following main elements:

• The vesting schedule will be updated to a vesting of 50% after at least 2 years and 50% after at least 3 years following the grant.
• Explicit vesting criteria will be installed. As criteria for long term performance, the closing price of the share must be higher than the exercise price minus the total amount of gross dividends attached to the shares which can be acquired through the exercising of the options.
• A 3 year cliff exercising period will be installed. $\bullet$

As a result the relative importance of the various components of remuneration (KPI's 100% at target) will change as follows:

Figure 4: Relative importance of the various components of remuneration 2011 (KPI's 100% at target).

Annex 5

Minutes of the meeting of the Board of Directors of 25 February 2010

Chairman's debriefing on Board Committees

President & CEO

Mr. D. Bellens makes the following conflict of interest statement, which is recorded in the minutes, upon which he leaves the room for this item.

In accordance with article 523 of the Belgian Companies Code, the President & CEO, Mr. Didier Bellens, declares to have a conflict of interest in connection with the Employee Incentive Plans item of the agenda of the present Board meeting and more especially on the determination of the Short & Long Term Incentives granted to him under the Plan 2009.

Mr. D. Bellens requests the Board to take note of his statement in this respect and to include the necessary statements in the management report of Belgacom relating to accounting year 2010.

Mr. D. Bellens shall also inform the auditor of Belgacom of this conflict of interest.

Mr. D. Bellens voluntarily decides not to participate in the deliberation and voting on such items on the agenda and leaves the meeting for the agenda items impacted by this conflict of interest statement and situation.

After discussion and upon recommendation of the Nomination & Remuneration Committee, the Board decides to grant an amount of 735,636 $\epsilon$ on the short term incentives and an amount of 465,003 € for the long term incentives to the President & CEO.

This closes the item impacted by article 523 of the Belgian Companies Code.