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Cautionary note with regard to “forward-looking statements” Some statements in this Annual Report are “forward-looking statements”. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are beyond PostNL’s control and impossible to predict and may cause actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current expectations, estimates, forecasts, analyses and projections about the industries in which PostNL operates and PostNL management’s beliefs and assumptions about future events. You are cautioned not to put undue reliance on these forward-looking statements, which only speak as of the date of this Annual Report and are neither predictions nor guarantees of future events or circumstances. PostNL does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Table of Contents 12<ul style="display: flex;"><li style="flex:1">We are PostNL </li><li style="flex:1">3</li></ul><ul style="display: flex;"><li style="flex:1">Message from Herna Verhagen </li><li style="flex:1">11 </li></ul>24 hours in PostNL Business Report 3456789<ul style="display: flex;"><li style="flex:1">How we create long-term value </li><li style="flex:1">15 </li></ul>22 31 42 48 55 59 Our strategy What sets us apart Mail in the Netherlands Parcels International Performance 2017 and outlook 2018 Governance 10 Statement of the Board of Management 11 Report of the Supervisory Board 12 Corporate governance 75 76 81 <ul style="display: flex;"><li style="flex:1">13 Risk management </li><li style="flex:1">92 </li></ul><ul style="display: flex;"><li style="flex:1">14 Remuneration report </li><li style="flex:1">100 </li></ul>104 106 15 Our tax policies and principles 16 PostNL on the capital markets Performance Statements <ul style="display: flex;"><li style="flex:1">17 Financial Statements </li><li style="flex:1">113 </li></ul><ul style="display: flex;"><li style="flex:1">195 </li><li style="flex:1">18 CR Performance Statements </li></ul>Appendices <ul style="display: flex;"><li style="flex:1">Appendix 1: Other CR Performance Statements </li><li style="flex:1">217 </li></ul>218 220 224 Appendix 2: Data coverage table Appendix 3: Glossary and definitions Appendix 4: Summary of key figures How to read this report Business Report This section provides an overview of the internal and external factors that are shaping our governance framework we had in place in 2017, business, the actions we implemented in 2017, an outline of the key topics the Board of and how we plan to continue realising long-term Management and the Supervisory Board dealt Governance This section provides an overview of the Performance Statements This section includes the Financial Statements and Corporate Responsibility (CR) Performance Statements. value for our stakeholders and the business going forward. <ul style="display: flex;"><li style="flex:1">with during the year, and related information. </li><li style="flex:1">Together, the We are PostNL, Message from Herna </li></ul>Verhagen, Business Report and Governance sections make up the Report of the Management Board. 1 We are PostNL <ul style="display: flex;"><li style="flex:1">3</li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li><li style="flex:1">4</li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li><li style="flex:1">5</li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li><li style="flex:1">6</li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li><li style="flex:1">7</li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li><li style="flex:1">8</li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li><li style="flex:1">9</li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li></ul>24H Ton Vlavianos <ul style="display: flex;"><li style="flex:1">10 </li><li style="flex:1">PostNL Accelerating transformation | 1 We are PostNL </li></ul>2 Message from Herna Verhagen further automated our sorting process. In line with customer Accelerating transformation demand, we began simplifying our product portfolio, which will improve our operational efficiency and quality and further increase customer satisfaction, and began the redesign of our commercial department. Overall, we realised cost savings of €56 million, unfortunately at the lower end of our guided bandwidth. We also increased our prices in a balanced manner, ensuring that we do not materially impact volumes. Looking back In 2017, we continued to make considerable progress transforming PostNL into a logistics e-commerce company, helping us realise our ambition to be the postal and logistic solutions provider in our chosen markets. And with 38% of the revenue we generated in 2017 related to e-commerce, we are well on track to reach our target of bringing this to at least 50% by 2020. We also further improved our financial position: our consolidated equity is positive, we refinanced our debt against attractive conditions, and we reinstated our dividend payment. Regulation continued to require significant management attention, and impacted us operationally and financially faster than anticipated. The decision by the Authority for Consumers and Markets (ACM) that PostNL has significant market power in the 24-hour bulk mail segment, and must grant network access to postal operators in this segment, further stimulated competition. We believe this will ultimately harm the These are achievements that we are rightly proud of. But we also need to acknowledge that not everything developed as we had hoped. For example, mail volume decline was higher than we projected, which was due to substitution and regulation that supports competition. Additionally, our International business did not perform as expected. This resulted in an underlying cash operating income of €225 million in 2017. While some of these issues were mainly the result of external factors, it is vital that we continue to look critically at ourselves and do sustainability of the Dutch postal network. Given the fundamental changes in the postal market, and the expected further decline in volumes, we believe regulation must be amended to reflect this reality and to facilitate an orderly and rational adjustment of the Dutch postal market. To safeguard the reliability and accessibility of the postal service, and to preserve decent labour conditions in this shrinking market, we believe that in the long run the consolidation of postal networks in the Netherlands is inevitable. We look forward to the outcome of the postal dialogue which the Secretary of State initiated under the supervision of Ms Oudeman. everything in our power to improve where necessary. Yet what has not changed is how vital our people are to the success of our great company, and how much we value them. Our diverse, dedicated and innovative people make this company successful. Because of the trust I have in them, I am confident that we will be able to continue our accelerated transformation and take the necessary steps to make improvements. As our position as a leading logistics e-commerce company in the Benelux continues to strengthen, we strive to create further profitable growth through our Parcels segment. Increasing e-commerce growth, combined with investments in our best-in-class infrastructure and our ongoing introduction of innovative services and solutions, resulted in record-breaking volume growth in 2017, both in the Netherlands and Belgium. We introduced a range of innovative solutions, such as the option for customers to reroute their parcel before the first delivery attempt. Additionally, we expanded our network, including through a number of acquisitions, the opening of a sorting centre at one of the bol.com facilities, and the opening of our nineteenth parcels processing and distribution centre 2017 per segment In Mail in the Netherlands, our focus remains on delivering a sustainable cash flow in a shrinking market, while dealing with strong competition and regulation that does not reflect the reality of continuously declining mail volumes. We continued our policy to mitigate the impact of volume decline through cost savings and price increases. For example, by working closely with municipalities and local communities, we removed or transferred post boxes that were infrequently used, and we <ul style="display: flex;"><li style="flex:1">11 </li><li style="flex:1">PostNL Accelerating transformation | 2 Message from Herna Verhagen </li></ul><ul style="display: flex;"><li style="flex:1">with cargo hub and temperature-controlled facilities. </li><li style="flex:1">employer that respects its people and provides decent working </li></ul>conditions. For example, by offering our mail deliverers contracts that offer additional hours, while continuing to have constructive discussions with our outsourcing providers to ensure we safeguard sustainable working solutions for the people we contract. Every day, I see examples of the effort our people put in, and the ideas and solutions they come up with to make this great company more successful. This allows us to realise our strategy and ambitions, enabling us to safeguard a healthy and sustainable future for PostNL. At our International segment, we continued to focus on enhanced cash profitability. Although we did not make as much progress as hoped, we continue to concentrate on capturing opportunities created by accelerating global e-commerce growth, using our cross-border operations, and on further building Nexive’s and Postcon’s position. Our policy of strict compliance with international dangerous goods regulation resulted in the loss of some of our customers at our cross-border parcel business, affecting our revenue. We also faced another year of tough market conditions in both Germany and Italy. Fortunately, we also benefitted from international e-commerce growth, and continued to launch new services and solutions to support our position as a strong player in the international e-commerce market. Looking forward In 2017, I announced the acceleration of PostNL’s transformation into a logistics e-commerce company, to realise our ambition to be the postal and logistic solutions provider in our chosen markets and to further improve our value proposition. The developments over 2017 show that the challenges and opportunities we face are both accelerating our transformation at a faster pace, while having a greater impact earlier than expected. In July, we introduced changes to our organisational structure and the composition of our Executive Committee. These changes will help us accelerate our transformation and ensure that our organisation is more closely aligned with our changing profile. This included the formation of an overall customer excellence team, which made substantial progress improving customer interaction and the creation of one customer experience across PostNL, resulting in further increased customer satisfaction rates. Ongoing volume decline, which is not slowing, and increasing competition supported by regulation are progressively impacting the financial health of the postal market. This will require fundamental changes in the way the Dutch postal market is currently regulated. We made significant additional progress in the digitalisation of our company and becoming more customer focused. We improved our online customer experience, internally migrated many systems to one IT environment, and we introduced a single HR system to manage the recruiting, hiring and At the same time, we are witnessing and capturing many of the opportunities that come from the fast-growing e-commerce business in the Benelux and internationally, and from technological developments, which are supporting our performance ambitions as we move towards 2020. continued education of employees up to management level. We also further reduced the environmental footprint of our operations. For example, we began installing solar panels across all our parcels’ processing and distribution centres, and replacing part of our fleet with vehicles that run on biogas. I am confident that we will continue to find a good balance between adjusting our mail operations in the challenging Dutch postal market and expanding our footprint as an e-commerce solutions provider, while creating long-term value for all our stakeholders. We are also making promising progress in our search for new profit pools by testing how we can leverage our core competences through emerging technologies. The human factor Our people play a vital role in our accelerated transformation. We need their support to make the transformation successful and deliver the service quality that customers and consumers are entitled to. This requires our people to be innovative and resilient, to invest in learning new personal and professional skills and to make our customers happy through everything they do, and challenges some of them to switch career paths. Our people will only be willing to do so if they believe in our transformation. It also requires a diverse workforce—people with different skills, competences, backgrounds, experience, and mindsets. Closing remark I would like to thank all our people for their individual and joint contribution and hard work in 2017. I would also like to thank our customers for their continuing trust, and for working with us to improve, innovate and expand our services and solutions, helping them strengthen their position and stay relevant in the increasing e-commerce market. Finally, with our commitment to progressive dividend and realising positive consolidated equity, we confirm our commitment to prioritising and creating long-term shareholder value. It is our obligation to create a work environment where people are respected and enjoy a culture that promotes innovation, diverse teams, and working together across business segments. We work hard to create such an atmosphere, where people are passionate and proud to work for PostNL. We want to be an Kind regards, Herna Verhagen, CEO <ul style="display: flex;"><li style="flex:1">12 </li><li style="flex:1">PostNL Accelerating transformation | 2 Message from Herna Verhagen </li></ul>24H Ellis Delahay <ul style="display: flex;"><li style="flex:1">13 </li><li style="flex:1">PostNL Accelerating transformation | 2 Message from Herna Verhagen </li></ul>Slide divider: Business Report <ul style="display: flex;"><li style="flex:1">14 </li><li style="flex:1">PostNL Accelerating transformation | 2 Message from Herna Verhagen </li></ul>3 How we create long-term value Our aim is to create long-term value for all our stakeholders. Our prominent role in society, and our presence at millions of doors every day, means we are uniquely positioned to provide a broad range of services and solutions to our customers. Below we summarise our value creation process, explaining how our inputs are transformed within our businesses into outputs and outcomes that benefit the company and our stakeholders. In this chapter we describe our stakeholder engagement process, and the most material topics resulting from this process. Additionally, we describe how we contribute to the Sustainable Development Goals (SDGs) most relevant for us. We close the chapter with a few examples that highlight how our sustainable delivery process responds to our stakeholders’ needs and contribute to the SDGs. 15 PostNL Accelerating transformation | 3 How we create long-term value Each of the elements of our value creation process is explained in greater detail in the remainder of the Business Report. You can read more about What we do in chapter four, Our strategy. The development of Our differentiators is outlined in chapter five, What sets us apart. What we have achieved across the business in 2017, Our outputs, are explained in detail in chapter six, Mail in the Netherlands, chapter seven, Parcels, and chapter eight, International. Our outcomes are contained in chapter nine, Performance 2017 and outlook 2018, where we describe the company’s key financial and corporate responsibility performance over the year, and conclude with the 2018 outlook. 16 PostNL Accelerating transformation | 3 How we create long-term value Our stakeholder engagement process Our stakeholders Our stakeholders are primarily part of the external environment, and they have a significant impact on what we do and how we develop as a company. The needs and interests of each of our stakeholders are different, and we engage with them on different levels and in different ways. Fully understanding the specific issues that affect our stakeholders helps us shape our ambition and strategy, ultimately enabling us to create long-term value. Customers: customers demand a reliable business partner, who understand their needs and offers seamless, high-quality, and sustainable services. Consumers expect accessible and reliable services. We engage with them through close daily contact, twice-yearly customer satisfaction assessments, customer events and knowledge sessions, as well as regular dialogue sessions. Investors: investors want a financially sound and reliable company, with a clear investment proposition, and solid long-term results. We engage with them in a number of ways, including through meetings and conference calls with analysts and (potential) investors, as well as through our quarterly results and presentations. People: our people expect a safe and secure working environment, which supplies them with real job satisfaction and development opportunities. To understand their needs, we undertake an annual employee engagement survey, and interact closely with the people who work with or for us on a daily basis. We also maintain good relationships with trade unions and works councils. Society: society wants a company that provides accessible and reliable delivery services, which takes care of society at large. We maintain close contact with a variety of bodies and organisations across society, for example by sending out a quarterly reputation survey, holding supplier evaluations, and maintaining contact with regulatory authorities and the Dutch ministry of Economic Affairs. We also ensure we have a proactive relationship with the media. Our most material topics By engaging with our stakeholders, we are able to understand the social, business, and environmental topics that are important to them. From this we formulate the material topics that connect us. Understanding these material topics means we can more effectively and efficiently allocate our resources. Below we highlight our main material topics. You can read more about our materiality analysis, as well as a complete overview of all material topics, in chapter eighteen, the CR Performance Statements. 17 PostNL Accelerating transformation | 3 How we create long-term value Our Sustainable Development Goals The Sustainable Development Goals (SDGs) are a collection of 17 global goals set by the United Nations. The SDGs were established with the aim of ending poverty, protecting the planet, and ensuring prosperity for all. As part of our materiality analysis, we carried out desk research on the external environment, including on the SDGs. We have identified two SDGs that are most relevant for us. As a company that employs over 44,000 people and cares about their future employment, the SDG Decent work and economic growth is pertinent to us. We believe sustainable employability is about ensuring our people are skilled, healthy and motivated to work inside or outside the company, today and in the future. Additionally, our networks and innovative solutions enable us to create opportunities not only for ourselves within the e-commerce market, but also for our customers by helping them grow their business. The SDG Climate action is significant to us as the volume of parcels we deliver continues to grow sharply. Unchecked, this could lead to a steep increase in carbon emissions. We believe sustainable delivery, including sustainable operations, is vital to help safeguard the planet, protecting our interests and those of our stakeholders. In the table below we explain how we contribute to the targets set for each goal. On the next two pages, we explain how we are taking into account the needs of our stakeholders and how our sustainable delivery process contributes to the most material SDGs. For each of the steps within this process we highlight a number of outcomes and impacts from our value creation process, and show how these are connected to our most material topics and SDGs. 18 PostNL Accelerating transformation | 3 How we create long-term value Our sustainable delivery process Below we explain how we are taking into account the needs of our stakeholders and how our sustainable delivery process contributes to the SDGs. For each of the steps within this process we highlight a number of outcomes and impacts from our value creation process, and show how these are connected to our most material topics and the SDGs. This is vital if we are to realise our ambition of being the logistic solutions provider in our chosen markets. One example of realising this ambition is a partnership we entered into with two clean fuels companies, where we created an infrastructure of biogas filling stations located an acceptable distance from our sorting and distribution centres. 19 PostNL Accelerating transformation | 3 How we create long-term value

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