your guide to the maturity of royal mail’s save as you ......the royal mail saye scheme matures on...

Your guide to the maturity of Royal Mail’s Save As You Earn scheme 2014

Contents

Introduction

Submitting your choices

Jargon buster

Contacts

Dates for your diary

Your choices explained

Your choices

Frequently asked questions

Page 3 Page 4 Page 5

Page 12Page 10Page 8

Page 16 Page 18

Terms in bold are defined in the jargon buster on pages 16 and 17.

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Congratulations

The 2014 Royal Mail Save As Your Earn (SAYE) scheme matures on 1 December 2017. At that point, you will be able to buy the shares you have been saving for over the last three years at the option price of 360p*.

How to use this booklet

Dates for your diaryThis section sets out important dates during the maturity period. Once you have made your choice, look at this section to work out the key dates by which any action should be taken.

Your choices This section sets out the choices available to you and explains how to submit your instructions.

Your choices explainedThis section provides additional information about the choices available to you.

Frequently asked questions This section provides answers to a number of frequently asked questions.

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* If you have missed any contributions over the length of your SAYE contract, your maturity date will be deferred by the number of payments that you have missed. The enclosed statement will confirm your revised maturity date.

This booklet and the enclosed statement provide you with detailed information regarding your choices. Please take your time to read them carefully before deciding what to do with your savings.

From Tuesday 7 November 2017 You can submit choices on the Royal Mail Employee Share Plan (ESP) portal from this date, for processing on 1 December.

Friday 24 November 2017 Choices must be submitted by this date if you want to exercise your option on 1 December and receive any dividend Royal Mail pays in January 2018.

Friday 1 December 2017 – Maturity dateChoices submitted by 24 November 2017 will be processed on this date. A weekly cut-off applies from this point. Instructions received by close of business each Friday will then be processed the following Friday.

Week beginning 4 December 2017Colleagues who chose repayment of savings, or the option to exercise and sell their SAYE shares before 24 November 2017 cut-off date will receive proceeds in their bank account.

Colleagues who chose to exercise and keep their SAYE shares and transfer them to a Royal Mail Nominee Share Service Account, will be able to view their shares online from this week.

Wednesday 20 December 2017 Last chance to submit the following choices via the portal: buying shares at market price (market purchase) and buying your shares under option and placing them into the Equiniti ISA.

Thursday 31 May 2018 – Last date of instruction Last date that exercise instructions can be received by Equiniti. Any savings not used will be returned to the saver.

Dates for your diary

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Please note there could be some movement in share price between the time you make your instruction and the point at which your instructions are processed.

Your choices

The Royal Mail SAYE scheme matures on 1 December 2017 and the choices available to you are detailed below.

You have six months from the maturity date stated on your SAYE statement, enclosed with this booklet, to submit your instructions on the ESP portal at www.royalmailemployeeshares.co.uk. After this time, your option to acquire shares will lapse and your savings will be returned to you.

Please note the Equiniti ISA and market purchase choices (see options 2 and 5 in this section) are only available via the portal until 20 December 2017.

You can cancel your exercise instruction at any time up to the weekly cut-off point (close of business every Friday, except during the week prior to Christmas where the cut-off will be Wednesday 20 December 2017) by logging onto the ESP portal.

The exception is the market purchase request. Once submitted, this cannot be changed.

Your choices are:

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Choice 1Buy your Royal Mail shares under option

Buy all the Royal Mail shares under option, at the option price of 360p, using the savings you have built up.

Shares will be credited to your online Royal Mail Nominee Share Service Account. This will be opened as part of your instruction unless you already have one. See the ESP portal for terms and conditions. Alternatively, you can choose a paper share certificate. See the jargon buster for the benefits of an online account.

Please note: to be eligible for any interim dividend payment the Company chooses to pay in January 2018, you need to submit your instruction by 24 November 2017. This will ensure your name is on the shareholder register by the dividend record date, likely to be in early December 2017.

If the closing share price prior to the day your instruction is processed is lower than the option price, your instruction will be cancelled. You will receive an email informing you of this. You will be able to resubmit your instruction at another time. Royal Mail reserves the right to postpone or cancel any exercise instructions to acquire shares, if deemed not to be in the best interests of colleagues.

Choice 2Buy your Royal Mail shares under option and place into an Equiniti ISA


Your shares will be placed directly into an Equiniti Shareview Dealing ISA, a stocks and shares ISA. Product information and full terms and conditions are available via the ESP portal.

This choice is only available via the ESP portal until 20 December 2017. However, if you exercise your option and choose to keep your shares in the form of a paper share certificate, you can still subsequently set up an Equiniti ISA to transfer your shares into. You must do this within 90 days of the date of exercise.

Choice 3Buy your Royal Mail shares under option and sell them straightaway


Equiniti will then instruct Equiniti Financial Services Limited (EFSL) to arrange to sell your shares and deposit the proceeds directly into the bank account your salary is paid into. The value of your proceeds will depend on the share price achievable at the time EFSL places the trade in the market.

If Equiniti does not hold details of your bank account, a cheque will be sent to your home address. Timings are subject to settlement and BACS processing timeframes.

There is a dealing charge of 0.5% of the value of the transaction, with a minimum fee of £17.50. Full terms and conditions of the share dealing service are available on the ESP portal.

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Choice 4Savings back

If you don’t want to take up the option to buy shares, you can have all your savings returned to you.

They will be paid directly into the bank account your salary is paid into. If Equiniti does not hold details of your bank account, a cheque will be sent to your home address.

Choice 5Buy shares at market price

If the share price is lower than the 360p option price at the time of submitting your instructions, you will also have the option to use your savings to buy shares at the market price (market purchase).

This choice is only available via the ESP portal until 20 December 2017.

A dealing charge of 0.5% of the transaction, with a minimum fee of £17.50, plus Stamp Duty Reserve Tax (currently at the rate of 0.5% of the total cost of the shares) is payable. We recommend speaking to your independent financial advisor if you are considering this option.

Full terms and conditions of the market purchase service are available on the ESP portal.

A market purchase request cannot be changed once submitted. However, if you select this option, but then the closing share price prior to the date your instruction is processed is greater than the option price, your shares will be bought at the 360p option price instead.

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Submitting your choices

Once you have decided what to do with your savings, you need to submit your instructions on the ESP portal at www.royalmailemployeeshares.co.uk.

If you are registering for the first time, you will be sent an activation code for your account. If you have a royalmail.com email address, the activation code will be sent straightaway by email. If not, your activation code will be sent to your home address. This can take up to five working days. You should therefore allow sufficient time to register and submit your instructions.

Once you have activated your account, please log onto the portal to submit your instructions:

• Click on ‘Start Instruction’ at the foot of the homepage

• Follow the step-by-step process to submitting your maturity instructions

• You will then see a summary of your maturity instruction.

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Here are the options you will see on screen.

‘I want to exercise and buy my shares and see any available choices’

If you select this option, you will then be asked what you want to do with your shares:

• Keep your shares, either in the online Royal Mail Nominee Share Service Account or in certified form (paper share certificate). See choice 1

• Place your shares into an Equiniti ISA (this option will be shown until 20 December). See choice 2

• Sell your shares straightaway using the preferential dealing service for Royal Mail colleagues. See choice 3.

If the closing share price prior to the day your instruction is processed is lower than the option price, your instruction will be cancelled. You will receive an email informing you and will be able to resubmit your instruction at another time.

‘I want to withdraw my savings and see any available choices’

If you select this option, you will then see a screen asking you whether you would like the savings to be returned to you (see choice 4) or, whether you would like to use the savings to acquire shares at the market price (market purchase). See choice 5.

If you are instructing a market purchase, once processed your shares will be held in the Royal Mail Nominee Share Service Account. If you do not hold an account then one will be opened for you.

If the closing share price prior to the day your instruction is processed is higher than the option price, your market purchase request will revert to an exercise of options. Your savings will be used to acquire shares at the option price of 360p.

1 2

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Your choices explained

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Why might I do this? What will happen? What about taxes?

CHOICE 1

Buy your Royal Mail shares under option

• You want to be a Royal Mail shareholder

• You would like to receive any dividends Royal Mail pays in future

• You think it is a good investment, i.e. the share price may go up

• You want to choose when and how many shares to sell in future (not now)

• Shares credited directly to your online Royal Mail Nominee Share Service Account or you will receive a paper share certificate

• You will become a Royal Mail shareholder and could receive dividend payments twice a year, if the Company chooses to pay them. Remember to submit your instruction by 24 November 2017 to ensure you are eligible for any interim dividend paid in January 2018

• No income tax or National Insurance payable on receiving the shares

CHOICE 2

Buy your Royal Mail shares under option and place into an Equiniti ISA



• You want to protect your shares from capital gains tax on any growth in value (see jargon buster)

You want to get the tax benefits of a stocks and shares ISA including:

• Investing up to £20,000 in the 2017/2018 tax year

• No need to pay tax on dividend income received from UK securities

• Shares deposited directly into your Equiniti ISA, without any dealing fee


• No income tax, capital gains tax or tax on dividend income is payable

• The extent and value of any ISA tax advantages or benefits will vary according to your individual circumstances. The levels and bases of taxation may also change

CHOICE 3

Buy your Royal Mail shares under option and sell them straightaway

• You want cash back and want to gain from the current share price

• You do not want to keep your money in shares

• Money paid directly to you by cheque or bank transfer

• You will have to pay a fee for selling the shares (0.5% of the value of the transaction, with a minimum fee of £17.50. See the ESP portal for the full terms and conditions of the share dealing service)

• You may have to pay capital gains tax if the gain on the sale, when added to any other capital gain, exceeds your annual capital gains tax allowance

CHOICE 4

Savings back

• You want your cash back • Money paid directly to you by cheque or bank transfer

• No income tax or National Insurance payable when the money is returned

CHOICE 5

Market purchase



• Share price is lower than the option price

• Savings used to purchase shares at the market price

• A dealing charge of 0.5% of the transaction with a minimum fee of £17.50, plus Stamp Duty Reserve Tax (currently at the rate of 0.5% of the total cost of the shares) is payable



• Stamp Duty Reserve Tax will be payable at the rate of 0.5% of the total cost of transaction

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Why might I do this? What will happen? What about taxes?

CHOICE 1

Buy your Royal Mail shares under option



• You think it is a good investment, i.e. the share price may go up

• You want to choose when and how many shares to sell in future (not now)

• Shares credited directly to your online Royal Mail Nominee Share Service Account or you will receive a paper share certificate



CHOICE 2

Buy your Royal Mail shares under option and place into an Equiniti ISA



• You want to protect your shares from capital gains tax on any growth in value (see jargon buster)

You want to get the tax benefits of a stocks and shares ISA including:

• Investing up to £20,000 in the 2017/2018 tax year

• No need to pay tax on dividend income received from UK securities

• Shares deposited directly into your Equiniti ISA, without any dealing fee


• No income tax, capital gains tax or tax on dividend income is payable

• The extent and value of any ISA tax advantages or benefits will vary according to your individual circumstances. The levels and bases of taxation may also change

CHOICE 3

Buy your Royal Mail shares under option and sell them straightaway

• You want cash back and want to gain from the current share price

• You do not want to keep your money in shares

• Money paid directly to you by cheque or bank transfer

• You will have to pay a fee for selling the shares (0.5% of the value of the transaction, with a minimum fee of £17.50. See the ESP portal for the full terms and conditions of the share dealing service)

• You may have to pay capital gains tax if the gain on the sale, when added to any other capital gain, exceeds your annual capital gains tax allowance

CHOICE 4

Savings back

• You want your cash back • Money paid directly to you by cheque or bank transfer

• No income tax or National Insurance payable when the money is returned

CHOICE 5

Market purchase



• Share price is lower than the option price

• Savings used to purchase shares at the market price

• A dealing charge of 0.5% of the transaction with a minimum fee of £17.50, plus Stamp Duty Reserve Tax (currently at the rate of 0.5% of the total cost of the shares) is payable



• Stamp Duty Reserve Tax will be payable at the rate of 0.5% of the total cost of transaction

Frequently asked questions

You can find more advice and guidance on the frequently asked questions page, available via the ESP portal homepage.

Do I have to pay for the shares?You have been saving for these shares for the last three years and no further payment is required beyond what is in your savings account.

Will I have to pay tax if I buy shares? In most circumstances, you won’t have to pay income tax or National Insurance on your shares when you buy them. However, you may have to pay capital gains tax (CGT) on any gain made between the option price and the market price when you sell the shares. Every person has a yearly CGT allowance and you will not have to pay CGT on any gains you make below your allowance. For 2017/18, the allowance is £11,300.

On the SAYE summary enquiry screen, how is the ‘indicative scheme value’ and ‘potential gain’ calculated? How is the ‘cost of shares’ calculated?The indicative scheme value will be the greater of:

• that day’s value (share price multiplied by shares under option), or

• your total savings at the end of the savings term.

The potential gain is calculated by working out any increase between the ‘cost of shares’ (savings needed to buy all the shares under option) and ‘today’s value’ (the current share price multiplied by the number of shares under option).

If the option price is higher than the current share price, the figure displayed will be zero.

How many shares can I buy at the end of the SAYE scheme?The number of shares you can buy at the end of the savings term depends on the amount you agreed to save each pay period under your SAYE contract.

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The calculation for working out the number of shares you can buy at the end of the savings term is: your total savings at the end of the savings term divided by the option price (360p).

If you have chosen market purchase, then this will be your total savings minus a dealing charge of 0.5% of the transaction with a minimum fee of £17.50 plus Stamp Duty Reserve Tax (currently at the rate of 0.5% of the total cost of the shares), divided by the market price at the time the purchase is arranged.

On the SAYE summary enquiry screen, why does the ‘potential gain’ value go up and down and sometimes show as zero?The screen shows the Royal Mail share price via a live feed (with a slight time delay) and it moves up and down throughout the day. The screen will show zero when the option price is higher than the current share price (there is no gain at this time). Where there is a positive figure, the option price is lower than the current share price. If the option price is lower than the current share price at the end of the savings term, you can choose to use your savings to buy Royal Mail shares. If you sell your shares straightaway (subject to any relevant dealing restrictions that apply to you) you could possibly make a profit. You will not pay any income tax or National Insurance. You may have to pay capital gains tax.

Why do share prices go up and down?The price of a company’s shares may go up or down depending on the demand for the shares.

This can be influenced by many things, including the company’s performance. If investors want to buy shares in the company, the increase in demand may increase the share price. However, the value of shares may go down as well as up and the share price does not always go up if a company does well.

Can I put the shares I choose to buy under SAYE into an ISA? Shares that you own as a result of the SAYE scheme can be transferred directly into an ISA without having to pay capital gains tax on any future sale of those shares.

Equiniti offers an ISA product, which allows you to hold all ISA eligible stocks. See the ESP portal for terms and conditions. Up until 20 December 2017, you can instruct Equiniti to transfer your shares directly into an Equiniti ISA via the ESP portal.

If you exercise your share option and decide to transfer your shares into an ISA after 20 December 2017, you will need to make your own arrangements. If you would like more information on this, please contact the Equiniti ISA Team on 0345 300 0430.

Remember, you only have 90 days from the date you exercise your share option to transfer your shares into an ISA. This is the timeframe permitted by HM Revenue & Customs (HMRC). If you want to transfer shares into your ISA after the permitted 90 days, you will need to sell the shares, put the money into your ISA and then buy the shares.

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This will involve additional dealing fees.

You can transfer other Royal Mail shares into the Equiniti ISA, once it is set up. Equiniti can also transfer your Royal Mail shares into your own stocks and shares ISA, if you already have one. Contact Equiniti for more information.

If I buy Royal Mail shares, when will I receive a dividend payment? To qualify for the first dividend payment following the maturity of the SAYE scheme, which is expected to be an interim dividend in January 2018, you must have exercised your option and bought shares by the dividend record date, which is likely to be in early December.

The Company does not have to pay dividends. How often we pay dividends and how much we pay will depend on many things, including our Company’s performance and future investment plans.

How will I receive a dividend payment?If you chose to buy your shares and keep them, Equiniti will pay any dividend payments into the bank account we pay your salary into.

If Equiniti does not have details of your bank account, they will send a cheque to your registered home address. If you want to receive a cheque, you need to contact Equiniti and ask them to remove the bank details registered on your account.

What is the market purchase option? If the option price is higher than the closing share price you can use the market purchase facility to buy Royal Mail shares at the market price. A dealing charge of 0.5% of the transaction with a minimum fee of £17.50 plus Stamp Duty Reserve Tax (currently at the rate of 0.5% of the total cost of the shares) is payable.

Are all of the choices available for the whole six month period? The market purchase and Equiniti ISA choices will only be available via the ESP portal until 20 December 2017, for processing on 29 December 2017.

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How do I tell Equiniti that I have changed my details?It is important to keep Equiniti informed about any changes to your name or address details. You can do this by:

• Telling your manager, and asking them to update your details on the People System Portal (PSP).

• Updating your details through PSP, if you have access to the system.

• Filling in the ‘change of address’ form in the helpful documents section on www.myroyalmail.com/employee-share-offers. Post it to: Personal Data Changes Team, HR Services, Royal Mail, Pond Street, Sheffield, S98 6HR.

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Jargon buster

Capital gains tax (CGT) A tax that is normally paid on any gains made when shares are sold. You may have to pay CGT on any gain made between the option price and the market price when you sell the shares. Every person has a yearly CGT allowance and you will not have to pay CGT on any gains you make below your allowance. For 2017/18, the allowance is £11,300.

Dividend A portion of a company’s profits that the company pays to its shareholders. Companies do not have to pay dividends. Our Board will propose when and how often we will pay dividends to shareholders, and how much these dividends will be.

As a shareholder, you are able to vote on issues, including the payment of dividends, at annual general meetings and other shareholder meetings. Companies often pay an interim and a final dividend each financial year. You will receive any dividends that Royal Mail pays to shareholders in cash. How often Royal Mail pays dividends and how much it pays will depend on many things, including our performance and future investment plans.

Equiniti ISA SAYE scheme members have the option to exercise their option and place their shares into an Equiniti Shareview Dealing ISA. This is a stocks and shares ISA and designed to be a tax efficient way to hold stocks and shares.

Exercising your option Using your savings at the end of the SAYE scheme to buy company shares at the option price.

Gain on sale The difference between the option price (360p) and the market price on the date of sale.

Last date of exerciseLast date when you can decide to exercise your share option. If you do not place your instruction by this date, your option to acquire shares will lapse.

Market purchaseA special facility where the funds held in your SAYE account are used to acquire shares at the market rate. This is only typically used when exercising the option to acquire shares at the option price is not viable, for example because the option price is greater than the market price.

Maturity This is the end of the fixed-term savings contract and the point at which you can exercise your option to buy shares at the set option price. The maturity period lasts for six months.

Option priceThe discounted share price set at the beginning of the SAYE scheme. Companies typically set the option price at a 20% discount to the market price when the shares are granted, in this case three years ago. You have the opportunity to buy Royal Mail shares at this price (360p) at the end of the savings term.

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Royal Mail Nominee Share Service Account This is an online service provided by Equiniti and is a convenient way to manage your Royal Mail shares without a share certificate. It offers competitive dealing rates and faster settlement when transacting, as well as dividend collection and the ability to vote electronically. It offers a paperless approach to share ownership and increased privacy as your shareholder details are removed from the public share register.

SAYE (Save As You Earn)A voluntary tax-efficient cash saving scheme that gives you an option in the future to buy shares in the company you work for at a predetermined option price. They typically run over three or five years and colleagues agree to save a regular weekly or monthly amount.

Share certificateIf you do not wish to open a Royal Mail Nominee Share Service Account (see the benefits of the online service in the definition above), a paper certificate will be sent to your home address, at your own risk, shortly after the date of exercise.

Share price The market price of a Royal Mail share.

Stamp Duty Reserve TaxA tax paid to Her Majesty’s Revenue & Customs (HMRC) on the purchase of shares.

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Contacts

Administrator:Equiniti is our SAYE scheme administrator. If you have any questions after reading this guide, you can get more information by contacting them.

Address:Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom

Employee Shares Helpline:0800 012 12 13 (or +44 121 415 0268 if you are calling from outside the United Kingdom). Calls are free from a BT landline but other network providers may charge. The Employee Shares Helpline is open from 08.30am to 5.30pm, Monday to Friday.

Live Chat:You can also log into Live Chat at www.myroyalmail.com/employee-share-offers and speak live to a share scheme expert.

Textel or Minicom number:0800 011 3649 (or +44 121 415 7028 if you are calling from outside the United Kingdom). This service is open from 08.30am to 5.30pm, Monday to Friday.

If you would like this guide in a different format, for example, in large print, in Braille or on audio tape, please contact the Royal Mail Employee Shares Helpline on 0800 012 12 13.

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your guide to the maturity of royal mail’s save as you ......the royal mail saye scheme matures on...

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