Cautionary note with Introduction and

regard to “forward-looking financial highlights

statements” This is TNT’s annual report for the financial year ended
31 December 2007, prepared in accordance with Dutch
Some statements in this annual report are “forward-looking regulations. Since TNT delisted its American Depositary
statements”. By their nature, forward-looking statements Receipts from the New York Stock Exchange on 18 June 2007,
involve risk and uncertainty because they relate to events and and its reporting obligations with the United States Securities
depend on circumstances that will occur in the future. These and Exchange Commission terminated 90 days later on 16
forward-looking statements involve known and unknown risks, September 2007, TNT is no longer required to file its annual
uncertainties and other factors that are outside of TNT’s report on Form 20-F. This annual report reflects that, as, for
control and impossible to predict and may cause actual results example, there are no references to Form 20-F and information
to differ materially from any future results expressed or that only needed to be provided on the basis of US law, and not
implied. These forward-looking statements are based on required by Dutch law, has not been inserted. TNT will
current expectations, estimates, forecasts, analyses and continue to publish its annual report and communications in
projections about the industries in which TNT operates accordance with the US Securities Exchange Act on its
and TNT management’s beliefs and assumptions about corporate website, group.tnt.com. Also, where TNT thinks it
future events. is helpful, certain information is retained for comparative
purposes. In this way TNT intends to provide its stakeholders
You are cautioned not to put undue reliance on these with a clear overview of its financial year 2007.
forward-looking statements, which only speak as of the date
of this annual report and are neither predictions nor guarantees Unless otherwise specified or the context so requires, “TNT”,
of future events or circumstances. TNT does not undertake any the “company”, the “group”, “it” and “its” refer to TNT N.V. and
obligation to release publicly any revisions to these forward- all its group companies as defined in article 24b, book 2 of the
looking statements to reflect events or circumstances after the Dutch Civil Code.
date of this annual report or to reflect the occurrence of
unanticipated events, except as may be required under TNT has its seat in the Netherlands, which is one of the
applicable securities laws. Member States of the European Union (EU) that has adopted
the euro as its currency. Accordingly, TNT has adopted the
euro as its reporting currency. In this annual report the euro
is also referred to as “€”.

As required by EU regulation, as of 2005 TNT’s consolidated

financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted
by the European Union.

Selected financial data

The selected financial data below have been derived from
TNT’s audited consolidated financial statements and the related
notes included in chapter 8 of this report.

TNT has acquired a number of companies and businesses

during the years, which limit the comparability of its
year-on-year figures.
Year ended and position at 31 December

Selected financial data 2007 2006 2005 2004

Statements of income
Total revenues 11,017 10,060 9,329 8,827
Other income 75 65 38 8
Salaries and social security contributions (3,608) (3,384) (3,318) (3,216)
Depreciation, amortisation and impairments (349) (318) (303) (296)
Other expenses (5,943) (5,147) (4,598) (4,213)

Total operating expenses (9,900) (8,849) (8,219) (7,725)

Total operating income 1,192 1,276 1,148 1,110
Profit before income taxes 1,099 1,223 1,146 1,092
Profit for the period from continuing operations 783 828 770 720
Profit/(loss) from discontinued operations 206 (157) (109) 32
Profit attributable to the shareholders 986 670 659 752

Ratios
Operating margin (%) 1 10.8 12.7 12.3 12.6
Average number of outstanding shares (in millions) 383.0 420.7 454.4 473.4
Earnings per ordinary share (in cents) 2 257.4 159.3 145.0 158.9
Earnings from continuing operations per ordinary share (in cents) 203.6 196.6 169.0 152.1
Earnings from discontinued operations per ordinary share (in cents) 53.8 (37.3) (24.0) 6.8
Average number of outstanding shares on diluted basis (in millions) 385.1 423.9 456.4 474.0
Earnings per diluted share (in cents) 2 256.1 158.1 144.4 158.7
Earnings from continuing operations per diluted share (in cents) 202.6 195.1 168.3 151.9
Earnings from discontinued operations per diluted share (in cents) 53.5 (37.0) (23.9) 6.8
Dividend per share (in cents) 3 85.0 73.0 63.0 57.0
Dividend pay-out ratio (%) 4 33.0 45.8 43.4 35.9

Balance sheets
Non-current assets 4,823 4,277 3,663 5,070
Current assets 2,252 2,122 2,355 3,159
Assets held for sale 10 409 2,378 0

Total assets 7,085 6,808 8,396 8,229

Equity 1,951 2,008 3,279 3,344
as % of total liabilities and equity 27.5 29.5 39.1 40.6

Non-current liabilities 2,232 2,112 1,608 2,221

Current liabilities 2,902 2,542 2,279 2,664
Liabilities related to assets classified as held for sale 0 146 1,230

Total liabilities and equity 7,085 6,808 8,396 8,229

Cash flow statements continuing operations

Net cash from operating activities 643 857 969 690
Net cash used in investing activities (8) 1,068 (262) (266)
Net cash used in financing activities (635) (2,152) (768) (298)
Changes in cash and cash equivalents 0 (227) (61) 126

Cash flow statements discontinued operations

Net cash from operating activities (19) (63) 43 268
Net cash used in investing activities 4 (30) (22) (24)
Net cash used in financing activities 16 36 8 (202)
Changes in cash and cash equivalents 1 (57) 29 42
(in millions, unless otherwise stated)
1 – Operating income as percentage of total revenues.
2 – Profit attributable to shareholders divided by the average number of (diluted) ordinary shares.
3 – For 2007 the final dividend is based on the estimated outstanding number of ordinary shares per mid April 2008.
4 – Dividend as percentage of earnings per share (EPS).
table of contents
1 – from the CEO 3
2 – general review of the company in 2007 6
3 – the Express division 26
4 – the Mail division 32
5 – report of the Supervisory Board 38
6 – corporate governance 42
7 – remuneration 54
8 – financial statements 60
9 – investor relations, shares, dividend and shareholder returns 127
10 – regulatory environment 131
11 – key risks 135

The information in this annual report, and in particular in

chapters 2, 3, 4 and 6, should be read in conjunction with
the consolidated financial statements that can be found
in chapter 8.

The report of the Board of Management is included in

chapters 2, 3, 4 and 6.
1
This annual report can also be viewed on TNT’s corporate Growth through networks
website: group.tnt.com. Any information on the website other Annual report 2007
than the contents of this annual report does not form part TABLE
of TNT’s annual report. OF
CONTENTS
Investing in TNT’s securities involves risk. Carefully consider
the key risks set out in chapter 11 of this annual report.
2
Growth through networks
Annual report 2007

CHAPTER 1
From
the CEO
 Looking at our performance, we can conclude that 2007 was a
good year, with favourable developments in most of our
activities and overall a realisation of our result expectations.

from
Profit from continuing operations came in at €783 million
after taking a €110 million provision for part of the
restructuring in Mail Netherlands in the coming years.
Corrected for the impact of these future costs the underlying

the CEO
profit from continuing operations grew by a healthy 4.5%.
Profit attributable to the shareholders came in at a record
level, aided by a book gain on the sale of our Freight
Management business.
2007 —
Annual report Our Express division produced good results in 2007.
Operating revenue growth was especially strong outside
Europe (43.0%), partly as a result of the inclusion of revenue
figures from the acquired companies in China, India and Brazil.
Integrating Hoau, Speedage and Mercúrio into our company
and aligning them with TNT standards is progressing well, but
will continue to demand a lot of management attention in
2008. In Europe, TNT Express continued to grow faster than
the market and its competitors, thereby further strengthening
our leading position. The profit margin in Express was 9.1% in
2007, which was, of course, negatively impacted by
investments in our new acquisitions in lower margin areas.

Dear colleagues, Our Mail division’s results were good as well. Mail managed
to grow revenues overall by 4.2% despite a 1.7% decline in
shareholders, customers revenues in the Netherlands. This was possible because
revenues in European Mail Networks grew by a healthy 33.8%.
and other readers, In 2007, the profit margin in Mail came in at 14.8% or 17.4% if
corrected for the €110 million restructuring provision
mentioned earlier.
2008 – the tenth year of TNT’s existence – will see us enter the
second phase of our “Focus on Networks” strategy in excellent In the United Kingdom, Mail grew its addressed mail services
shape: strengthening the core of our portfolio and further delivered through downstream access, but we also started
growing profitable activities in our emerging platforms. deliveries on our own in Manchester, Glasgow and Bristol.
Profitable growth will continue to be an important theme for And we addressed the unsatisfactory development of a UK
TNT in the years to come, which is why together with this parcel business by disposing of the company.
annual report you will find a brochure called New Growth with the
testimonies of some of our colleagues in two exciting growth Rebuffing strong competition, TNT Post Germany nearly
markets: China and Brazil. They tell us what growth means to doubled its revenues and extended its own network to almost
them, to their work, their careers and their personal lives. 25% of German households. The German government’s
adoption of a €9.80 minimum wage in December 2007 is
Growing our networks means we can extend the spread of our unexpected and provides a severe handicap for the further
services for existing and new customers. And, of course, a development of our business. We are contesting this minimum
growing business means more chances for our employees to wage in the German courts. Such a high wage level severely
develop their careers and grow as well. Share buy-backs have hinders competitors to Deutsche Post to start competition, but
allowed us to deliver extra growth in earnings per share and more importantly, it provides a serious test for Europe’s will to
return on equity for our shareholders. Finally, last year saw the fully liberalise its postal markets, not only legally but also by not
start of our Planet Me CO2 reduction programme, which will allowing practical hurdles.
allow us to mitigate the impact of our growth on our planet in
the short term, with a vision to becoming a carbon neutral TNT’s 2007 share price performance followed the trend
company in the longer term. of its peers and sector. The impact of the credit crisis and
resulting fear of a recession caused our share price to lose
Shareholder value growth 14% during 2007. Since the start of our Focus on Networks
strategy in December 2005, our total shareholder return until
As a company we aim to grow shareholder value by using our the end of 2007 was 18.5%, compared with an average of 13.5%
financial resources to invest in our business. for our peers.
3
Growth through networks
Annual report 2007

CHAPTER 1
From
the CEO
 TNT and AEX – share price Total shareholder
comparison 2007 return 2007 versus peers
Annual relative performance to
Euronext Amsterdam (AEX)

40 35

25
35
15
7.5%
5.1% 3.5%
5
30
-5 -3.5%

-11.2%
25 -15
-17.6%
-25

20 -35 -31.5%
AEX DPWN Eurotop UPS TNT FDX AP
Jan Feb Mrt Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 300
Transport
TNT
AEX Source — Bloomberg Professional (own currency based)

Since December 2005, we have been repurchasing shares,

contributing to increased earnings per share. In 2007, we
Customer value growth
repurchased almost 23 million of our own shares. It is our TNT aims to exceed its customers’ expectations by providing
policy to cancel all repurchased shares. distinctive levels of service quality and customer care. Our aim
is to deliver our customers’ consignments on time at the right
address in perfect condition every time. We encourage all of
Earnings per diluted ordinary share our people to go the extra mile in their dealings with
In € cents customers, knowing that providing exceptional service will
allow TNT to become distinctive in the market and further
2005 improve customer satisfaction and loyalty.
2006
2007 As our networks grow, we are able to offer our customers
more and better services. This was the case in Europe where
0 50 100 150 200 250 300 350 we added airport connections to Bordeaux and Larnaca
(Cyprus) to our air network and continued to increase our
The extended section of the 2007 bar relates to
discontinued operations.
market share. It applies even more to the emerging markets
where our expanding networks are actually an important
factor in the economic development of the countries where
Finally, we have announced our intention to increase the we operate.
dividend pay-out from around 35% of normalised net income to
around 40% by 2010. This move fits with the strength of our The extension of our Asian road network is another example.
cash flow and continues the pattern of our dividend payments With the expansion into Vietnam and China, this network
over the past years. In 2007, our dividend per share proposal now offers customers a new Economy Express product:
delivers an increase of 16.4%. It will be clear our share buy-back faster than sea, cheaper than air. As a result, volumes are
programmes directly benefit our long-term shareholders with growing fast.
increased dividend payments.
Growth for our employees
Dividend per share A growing company offers new opportunities to its employees.
In € cents Through organic growth and acquisitions, the number of our
employees grew from 139,000 to 161,000 in 2007. It’s good to
2005 see that our strategy has now resulted in some 17,000
4 2006
Growth through networks employees in China, 6,000 in Brazil and 2,000 in India.
Annual report 2007 2007
Instilling pride in our people is at the very base of our success.
CHAPTER 1 0 10 20 30 40 50 60 70 80 90
From We are a people company. People are key to our success: it is
the CEO their enthusiasm, their passion, their willingness to go the extra
Together these developments have led to a total shareholder mile that determines how well we are able to serve our
return performance in 2007 that is in the middle of our sector. customers and to exceed their expectations.
One of the challenges for TNT is the fact that we are Me, which includes a large number of innovative projects aimed
experiencing a lot of growth outside the Netherlands, while in at reducing the carbon footprint of our company.
our home market the main part of our business in Mail is
declining. TNT Post has devised a series of Master Plans to We have set up and will further refine a comprehensive system
counter volume declines in addressed mail that result from to measure, manage and report our CO2 emissions. Through a
competition and substitution of physical mail by forms of series of binding policies we are working hard to reduce these
electronic communication in the Netherlands. Depending on emissions across our global operations. And, as in our
the success of the negotiations for a new collective labour partnership with WFP, we will involve our employees as well,
agreement for TNT Post, between 6,500 and 11,000 people will supplying them with information and fostering ideas for energy
leave the company over time. Given our strong commitment to savings in their own lives.
social responsibility, we intend to do everything possible to
ensure these redundancies will be dealt with in a responsible
manner, assisting people from work to work. For this reason we
The coming year
have taken a provision of €110 million and will continue to take In 2008 the capital markets are likely to remain volatile. The
significant provisions to make this possible. crisis in the financial sector and the rising costs of oil and fuel
support the global sentiment that fears recession in the United
We know we ask our employees within TNT Post Netherlands States and a slow-down in other parts of the world’s economy.
to make great sacrifices to adapt to the realities of the market.
To underline our understanding, the Board of Management With our clear strategy aimed at capturing growth and creating
agreed with the Supervisory Board to again limit the 2008 value through the expansion of our delivery networks, TNT is
remuneration package. From 2008, the base salaries of the strongly positioned. Express should produce high single-digit
members of the Board of Management will increase in line revenue growth, while Mail should be growing at low single-digit
with the collective labour agreements in the key European levels. We expect the group’s overall results to grow further.
countries where TNT operates. For 2008, after four
consecutive years of frozen base salaries, a 2% increase will 2007 was a good year for TNT, one that put the company in a
be applied. The 2008 short-term and long-term incentives stronger position for the years to come. We have the
will again be capped at 2006 levels, which means a freeze for dedication and loyalty of our people, the support of our
the second consecutive year. shareholders, the trust of our customers and the wisdom of
our Supervisory Board to thank for all of this.
The subject of road safety in the emerging markets will be
addressed with the highest priority. Primarily driven by recent Kind regards,
acquisitions, the number of road traffic fatalities in our own
activities and those of our subcontractors jumped to an
unacceptable 42. Of those fatalities, 21 took place in India,
where the infrastructure and standards and legislation
governing road safety are still developing. We are doing our
utmost to ensure that our entire fleet of vehicles is safe and
well maintained and that all our drivers and subcontracted Peter Bakker
drivers are fit and qualified to operate their vehicles. CEO

Growth for our planet

When it comes to our planet, growth is not always positive.
Often economic growth means increasing pollution and
depletion of natural resources. While the global economy is
growing fast, issues such as poverty and hunger continue to
affect many hundreds of millions of people. As a company, we
do not close our eyes to these facts and we have developed two
initiatives to help combat these negative effects of growth.

Since 2002, we have been partners of the United Nations’

World Food Programme (WFP) in its fight against world
hunger. In 2007, we evaluated the first five years of our
partnership. In this period we accomplished much. In view of
these successes and the enthusiastic participation of our
employees, we decided to continue the partnership with WFP.
We will sign a new contract at the beginning of 2008.

As a transportation company we have always been aware of the

5
environmental impact of our activities. In 2005, we started a Growth through networks
programme called Driving Clean, aimed at reducing the Annual report 2007
pollution caused by our fleet. Driving Clean set us thinking
CHAPTER 1
about the broader issue of CO2 emissions and global warming. From
This is one of the major issues the world is dealing with today, the CEO
and one in which the transportation industry must seize its
responsibility. That is why we started a new initiative: Planet
 a focus on time and/or day certain pick up and delivery. It is
TNT’s business to deliver the “business” of its customers at the
right time and at the right place.

general TNT picks up, transports, sorts, handles, stores and delivers
documents, packets, parcels, and freight by combining physical
infrastructures such as depots and trucks, electronic

review of
infrastructures such as billing and track-and-trace systems, and
commercial infrastructures to attract and retain customers.

Goods and documents have different weights, shapes and sizes.

the company
They can be as light and small as a postcard or they can be as
heavy and as big as the engine of a jumbo jet. They can also
change shape, such as when several parcels are combined into a
single pallet, and they can have different requirements in terms

in 2007
of speed of delivery, security and point of delivery. Goods and
documents can have very different distance characteristics,
ranging from domestic to cross-border/regional to intra-
continental to intercontinental.
2007 —
Annual report In general, weight and speed are most commonly used to
characterise different kinds of customer requirements. This is
illustrated in two-dimensional charts such as the one shown
below, where the weight categories are below one kilogramme
(documents), between one and 30 kilogrammes (parcels) and
General above 30 kilogrammes (pallets, full loads and bulk) and the
speed categories are same day, time (and day) certain (e.g.
TNT N.V., through its two divisions, Express and Mail, is in the 10:00 next day), day certain/1-2 days, day certain/3-5 days and
business of transferring goods and documents around the day uncertain.
world. With its activities, TNT is part of the global
transportation and distribution industry; a vast industry whose All these different types of requirements need different delivery
market size is estimated to be over US dollars (US$) 3,500 networks and are served by different operators (see the chart
billion (as at 31 December 2007 approximately €2,400 billion). below). These range from very efficient and time-sensitive (air
TNT serves more than 200 countries and employs around and road) express networks operated by integrators to less
161,000 people. Over 2007, TNT reported €11 billion in expedited sea carriers. Freight forwarders operate virtual
revenues and an operating income of €1,192 million. TNT N.V. networks, using block space on other operators’ planes, ships
is listed and traded on Euronext Amsterdam by NYSE Euronext and (to a lesser extent) trucks, and their own (small) depots and
(ticker “TNT”). sites in harbours and at airports. Couriers focus on same day
delivery. Finally, in the widest sense, peripheral operators such
TNT is strongly committed to responsible global corporate as infrastructure providers (port authorities, airport operators,
citizenship. TNT implements various international standards in motorway owners), consultants and software companies can also be
order to retain its licence to operate. TNT measures, considered as actors in this sector.
benchmarks and reports its performance. TNT ranked first in
the Dow Jones Sustainability Index (DJSI) 2007. Simultaneously
with this annual report, TNT is publishing its social
responsibility report.

Mission and strategy

Mission statement
TNT’s mission is to exceed its customers’ expectations in the
transfer of their goods and documents around the world. TNT
delivers value to its clients by providing the most reliable and
efficient solutions through delivery networks.

TNT aims to lead the industry by:

6 ——instilling pride in its people,
Growth through networks ——creating value for its shareholders, and
Annual report 2007 ——sharing responsibility for the world in which it operates.
CHAPTER 2
General review of
the company in 2007
Business description
TNT is in the business of transferring goods and documents
around the world tailored to its customers’ requirements with
 Global transportation industry — segmentation TNT manages a portfolio of networks with different speed
characteristics, ranging from same-day to some day, and
Same day different weight characteristics, ranging from letters to heavy
Couriers parcels and pallets. TNT’s Express business focuses on
transferring documents, parcels and pallets that require time or
Time day certain delivery, whilst TNT’s Mail business focuses on
certain
Integrators
Express

transferring documents with day uncertain delivery (however,

Day certain in practice, in the Netherlands almost 100% of deliveries is next
(1-2 days) day). Due to the further optimisation of its network strategy,
TNT introduced in 2007 the segment “Other networks” in
Day certain
(3-5 days)
which TNT reports its Innight business. Formerly, this business
Trucking companies
Deferred

was reported as part of the Express division and prior to the

Standard
Day
parcel operators
Freight Sea sale of the Logistics division as part of Logistics. Consequently,
uncertain Forwarders Carriers TNT reports its Express business as of 2007 without the Innight
business and has adjusted the 2006 comparatives accordingly.
1 kg 30 kg 250 kg 1.000 kg 20.000 kg
documents parcels pallets full loads bulk TNT’s networks are in different development phases and offer
a plethora of growth opportunities. TNT’s most mature
Freight business is its Mail network in the Netherlands, where TNT
actively seeks to maintain its market leadership in a declining
Port authorities, airport operators, motorway owners, market with increasing competition. TNT’s Express networks
consultants and software companies in Asia, in particular in India, China and South-east Asia, and in
selective other emerging markets, such as Brazil, are at the
other end of the spectrum and are among the least mature
Global revenues US$ 3,500 billion networks in its portfolio. In these geographies TNT can shape
(Source: R.W. Baird, report “Global Integrators”, the market, strongly grow its networks and attain market
January 2007) leadership. In Europe, TNT continues to grow its Express and
Mail networks by building on its existing strong position. TNT
aims to accelerate growth in its networks organically, as well as
Focus on Networks strategy through selected acquisitions.

TNT’s strategy is to focus on providing delivery services by The chart below reflects an analytical and conceptual view on
expertly managing delivery networks. Thus, TNT calls its the relation between strategic focus and financial focus. It does
strategy Focus on Networks. This strategy was first presented not represent a management segmentation. From this chart
in December 2005, contains manageable execution risks, and is TNT has derived 10 strategic priorities which it manages.
based on TNT’s core strengths, with the objective of achieving
profitable growth. For more information on key risks, see
chapter 11. TNT’s portfolio of networks

In the first phase of its Focus on Networks strategy, TNT Strategic Focus Express Europe
White spots
Rest of
World
concentrated on transforming its foundations by exiting its Explore Asia
& Build Pacific
logistics and freight management activities, concentrating on Parcels
(Mail and Express) networks and optimising its capital EMN
structure. With the start of the second phase (“Grow and Build
Fast Int ‘l
Build Value”) in December 2007, the emphasis is now on Express
Special
Services
further strengthening both the core of the portfolio (Mail Europe

Netherlands and Express Europe) and the emerging platforms Grow Dom.
Invest Express
such as European Mail Networks, parcels and Express Europe
emerging businesses. Mail NL &
Actively other
Maintain

Financial Focus

Focus on Networks — two phases Cash Growth & Value Value Creation
Generation Cash Creation Growing to WACC

Phase 1 Phase 2

The combination of Express and Mail networks in TNT’s

current portfolio has several strategic advantages. TNT believes
6 December 2005 6 December 2007 7
the combination of business-to-business and business-to- Growth through networks
—
consumer deliveries, for which it has unique expertise in its Annual report 2007
6 December 2007
Express and Mail divisions respectively, becomes increasingly
CHAPTER 2
relevant in an era where e-related deliveries are growing General review of
Transforming Grow and exponentially and megacities, which require complex high the company in 2007
the foundations Build value density citizen services, will emerge. TNT also believes that
over time, certain operational and strategic synergies can be
 achieved across its portfolio, for example in linehaul activities. At the end of 2006, TNT launched a number of initiatives along
Having both Express and Mail in its portfolio gives TNT unique two tracks: commercial initiatives to limit volume decline to
cross-selling opportunities. And finally, the fact that Express 30% by 2015 compared to 2006 and cost initiatives to save €300
and Mail require comparable management capabilities, such million of annual costs. In 2007, TNT took restructuring costs
as network design, execution and planning, customer focus, of €110 million for the efficiency projects that its Mail division
market segmentation and brand awareness, allows TNT to will start in 2008 to standardise the collection, preparation, and
optimise management and competence development across delivery of mail as much as possible. TNT is now in the process
the company. of negotiating with trade unions to enable expeditious
implementation of the latter. At the same time, TNT has made
In Express, TNT’s strategic intent in phase 1 was fourfold: to substantial progress in growing its Mail activities outside the
strengthen the number one position in Europe in national and Netherlands. TNT has continued to significantly expand its
intra-European flows, to build uplift capacity from China to fuel regional networks in Germany and the United Kingdom.
its European network and establish an intra-China network, to TNT believes the combination of cost and commercial
build the number one position in rest-of-the-world selected initiatives in the Netherlands and growth initiatives outside
emerging markets, and to expand its position in the broader the Netherlands will contribute to Mail being able to continue
market through offering special services. Underpinning TNT’s to deliver a strong cash flow going forward. However, barriers
Express networks is a strong focus on key customer interfacing to competition (such as value added tax (VAT) exemption,
processes, by understanding customer needs, winning and hidden state subsidies, and, as recently adopted in Germany, a
keeping profitable customers, delivering excellent customer generally binding minimum wage) may hamper TNT’s ambition
service and delivering on time and in perfect condition. In all to grow its Mail activities outside the Netherlands.
four strategic intent areas TNT has made excellent progress in
2007. TNT has continued to strengthen its position in Europe More details on Mail can be found in chapter 4.
by, amongst others, finalising the integration of Trespertrans
S.L. (TG+), a Spanish company acquired in 2006, and capturing
high growth in Eastern Europe. In China, TNT is integrating
Financial strategy
Hoau Group of China (Hoau) to build the leading domestic TNT’s financial strategy is based on three pillars:
network in that country, and it has implemented its own Boeing ——driving business performance by using value-based
747 freighter service between China and Europe to capture the performance measures and standardisation of
strong growth on this intercontinental flow. TNT has acquired business processes,
domestic networks in India and Brazil and extended the reach ——maintaining the right financial flexibility to support
of its South-east Asian road network. Lastly, TNT has expanded growth platforms via capital expenditure and mergers
its position in special services by further growth in its same-day and acquisitions, and
business and continued fast growth in time-critical freight. ——keeping the capital structure efficient, at an investment
TNT’s Express division thus created a strong platform by grade long term credit rating of “around BBB+”.
delivering on all four strategic intents mentioned above.
These three key components of the financial strategy directly
In the second phase, the emphasis will be on network relate to:
optimisation to further strengthen the leading positions of ——effective risk management, internal control and compliance,
the Express division, to strengthen the Europe-Asia ——financial risk management and risk insurance structures,
connectivity, and to transform the newly acquired domestic ——aligned legal and funding structures, and
platforms in China, India and Brazil into integral international ——a balance in short and medium term shareholder returns
Express operations. through profitable growth, dividends and incidental share
repurchases or other shareholder returns from medium
More details on Express can be found in chapter 3. term excess cash.

In Mail, TNT’s strategic intent in phase 1 was twofold: to TNT’s current capital structure is based on and managed along
actively maintain its market share in its home market of the the following components:
Netherlands and to capture growth opportunities outside its ——maintaining a credit rating at investment grade
home market. In the Netherlands, TNT is faced with continuing “around BBB+”,
competitive pressure and substitution. TNT believes that ——availability of at least €500 million of undrawn
without new commercial and cost initiatives a volume decline of committed facilities,
up to 40% by 2015 compared to 2006 would be inevitable. ——structural funding via a combination of public and bank debt,
with a risk-weighted mix of fixed and floating interest,
In the first phase of the Focus on Networks strategy, ——cash pooling systems facilitating optimised cash
successfully completed at the end of 2007, TNT’s Mail division requirements for the group by facilitating centralised
thus prepared itself for full liberalisation of the Dutch mail funding and surplus cash concentration at group level, and
market, whilst outside the Netherlands, platforms were ——a tax optimal internal and external funding focused at
established to become the number one challenger to optimising the cost of capital for the group, within long term
incumbent European mail operators. sustainable boundaries.
8
Growth through networks
Annual report 2007 In the second phase Mail Netherlands will further detail TNT’s current long term credit ratings are BBB+ (stable
and execute the cost and commercial initiatives and continue outlook) for Standard & Poor’s Ratings Services (S&P) and A3
CHAPTER 2
General review of to monitor, evaluate and respond to regulatory developments, (stable outlook) for Moody’s Investors Services (Moody’s).
the company in 2007 whereas outside the Netherlands, it will focus on optimising These credit ratings result from an evaluation and analysis of
and growing market positions and realising growth many different factors. As mentioned, TNT focuses on
in profitability. maintaining an investment grade credit rating of “around BBB+”.
For this purpose it monitors the development of the key credit pace of postal liberalisation in Europe continue to affect those
ratios which are used by the rating agents and which may vary cash flows, although it is not possible to predict what the long
from time to time: term cash flow effects will be.
——FFO / Debt, whereby Funds From Operations (FFO) is
based on operating profits from continuing operations, after Cash requirements for capital expenditure fluctuate from
tax, corrected for, amongst others, depreciation and year to year, depending on the extent of strategic capital
amortisation and other major non-cash items, and Debt is projects, but have been well covered by operating cash flows.
defined as total interest-bearing borrowings of the The ratio of cash from operating activities to net capital
company, adjusted for on and off-balance sheet debt-like expenditure was 2.3 in 2007, 2.7 in 2006 and 3.7 in 2005. This
components and surplus cash. ratio is calculated as follows: net cash provided by operating
——Debt / EBITDA, whereby EBITDA is defined as operating activities divided by the sum of capital expenditure on other
profits before interest and taxes, corrected for, amongst intangible assets, disposals of other intangible assets, capital
others, depreciation and amortisation as well as expenditure on property, plant and equipment and disposals
operating leases. of property, plant and equipment, all as stated in TNT’s
——FFO / Interest, whereby Interest is corrected for, amongst consolidated cash flow statements. TNT expects these
others, pensions and leases. operating cash flows to continue to cover its capital
——RCF / Debt, whereby Retained Cash Flow (RCF) is defined expenditure requirements in the foreseeable future. TNT
as FFO less dividend. believes its working capital generates sufficient liquidity to
cover its requirements.
The weighted mix of the four ratios above forms an important
building block in TNT’s financial parameter framework, For any acquisitions or buy-back of shares that exceed the
whereby the current credit ratings are roughly based on the company’s immediate cash resources, the company would seek
following ranges: an FFO / Debt between 30%-35%, a to raise capital in the financial markets by means of bank
Debt / EBITDA of 2.0x-2.5x, an FFO / Interest around 5%, borrowings and private or publicly traded debt. For very
and an RCF / Debt around 17%. These ranges per ratio may substantial transactions, if required TNT would also consider
change over time, depending on market conditions and issuing hybrid debt or equity in order to maintain an investment
analytical considerations. grade “around BBB+”. Given the strength of TNT’s financial
position, credit ratings, and bank relationships, TNT currently
For its financial requirements in the context of its capital does not foresee an inability to access a wide range of capital
structure components, TNT works with approximately ten markets including equity, public debt, private debt and bank
relationship banks. This number is influenced by financial borrowing. TNT monitors and manages key financial ratios that
service requirements of TNT related to its global spread in are consistent with a strong credit rating. There are no aspects
activities, businesses and legal entities. of TNT’s current capital structure that TNT believes would
trigger a material increase in the cost of its debt or the inability
TNT aims to grow its free cash flow in the medium term. to access to capital markets.
TNT defines its free cash flow as the net cash from operating
activities minus net capital expenditure on property, plant, For details on the interest rates charged on TNT’s more
equipment and intangible assets, and proceeds from sale of significant long term loans as well as the maturity of TNT’s long
smaller assets. term loans and commitments, see notes 13 and 30 to TNT’s
consolidated financial statements.
Part of free cash flow is used for dividends after the
appropriation to reserves of (part of) the profit. TNT tries TNT does not hold or issue financial instruments for trading
to meet shareholders’ return requirements through growth purposes, nor does TNT allow its subsidiaries to do so. For
in value of the company’s shares, dividends, and incidental details on TNT’s use of financial derivatives for hedging
share repurchases. As part of its dividend guidelines, TNT purposes, see notes 3, 6, 13, 30 and 31 to TNT’s consolidated
intends to pay interim and final dividends in cash annually. financial statements.
The TNT Reserves and Dividend Guidelines can be viewed
on TNT’s corporate website, group.tnt.com. During 2007, TNT implements a comprehensive insurance policy covering its
TNT announced its intention to increase the dividend pay-out operational risk profile as appropriate, using a mix of self
from around 35% of normalised net income currently to insurance, re-insurance, and direct external insurance.
around 40% by 2010. Normalised net income is defined as As frequency losses (such as cargo and vehicle claims) are of an
“profit attributable to the equity holders of the parent” operational and customer service nature, TNT believes that self
adjusted for significant one time and special items. Remaining insurance is the best method to motivate operational units to
free cash flow will be allocated to strategic profitable growth address the underlying causes of these losses. Improved risk
of the group. management then has an immediate positive financial effect.
TNT’s total self insured frequency claims are structured via an
In case of medium term excess cash other forms of value in-house captive insurance company and capped on an annual
creation for its shareholders will be evaluated, including tax basis via re-insurance. During 2007, TNT’s total annual
exempt share buy-backs. retention cap on these losses was €6 million.
9
Growth through networks
As with any global organisation, operating cash flows are TNT’s “catastrophe exposures” are insured in the traditional Annual report 2007
affected by economic and business trends. A significant portion insurance markets. These include aviation, property and
CHAPTER 2
of TNT’s operating cash flows is derived from TNT’s Mail business interruption, general liability, fraud, and director and General review of
division, particularly from operations in the Netherlands. officers’ liability insurance. TNT has a strict policy to transfer the company in 2007
Amongst other factors, the impact of electronic substitution on risks only to insurers with a rating of A- or higher, and this is
mail volumes, postal regulations in the Netherlands, and the monitored on an ongoing basis.
 Attention is being given to adjust TNT’s insurance protection
to the ever changing legal and regulatory environment in which
Digitisation
it operates, and all insurance policies are therefore tailor-made Digitisation is a trend that TNT has faced for quite some time.
to TNT’s unique requirements. In addition, current insurance As a result of continuously improving technologies, documents
arrangements also need to support strategic developments and can be digitised, transmitted and reproduced without requiring
the changing risk profile of the company. delivery of the printed material. Digitised design of goods and
services as well as globalisation of product development and
All of TNT’s financial strategies and actions will take into promotion will also influence delivery requirements.
account the key components of its financial solidity
requirements as mentioned.
Markets and economic
Industry context environment
TNT believes the following four trends will be increasingly
relevant to its business over the next five to 10 years:
Express markets
The express sector is very competitive. Competition centres
Environment on network coverage, speed and other service elements as well
as price. Larger players, such as the global integrators, can
There is growing consensus amongst the general public, achieve attractive margins through economies of scale and (to
politicians and others that climate change is threatening the a lesser extent) scope. Local and regional players focus on high
environment. Increasing levels of carbon dioxide (CO2) in the local network density. The industry historically has shown
atmosphere are trapping more heat, thus increasing global growth rates double those of Gross Domestic Product (GDP)
temperatures. This phenomenon, referred to as global and is expected to continue to do so given increasing demand
warming, will give rise to all sorts of measures and regulations for express-like products. The US market has over the last 30
that try to abate the CO2 emissions around the globe. Since years moved from being fragmented to very concentrated, Asia
transport and distribution contribute nearly one-fifth to these is fragmented and developing, and Europe is in between.
emissions, the transport and distribution industries will be
affected significantly by any measures or regulations. TNT has The express sector has significant barriers to entry, mainly the
responded pro-actively to this challenge by launching its Planet required scale and network reach, ICT capabilities, investments
Me initiative. More details on Planet Me can be found in this in fixed assets, and brand name and reputation. New entrants
chapter under Differentiating ourselves as well as in TNT’s may come from the parcel and freight sectors where companies
2007 social responsibility report. might improve their offerings to day-definite products. This
could increase price competition.
Demographic trends TNT Express uses a clear market definition to clarify its
Demographic trends are changing the composition of the position within the sector. This express market definition
population across the globe. For example, in the largest encompasses time certain, next day, and fastest by air or road
Western European countries it is estimated that between day certain delivery for business-to-business consignments
20% and 25% of the population will be above the age of 65 by transported through a scheduled network with door-to-door
2020. Also, people will live increasingly in cities with more than track-and-trace of individual items/consignments. For 2006
five million inhabitants (so-called megacities), posing significant TNT estimated the size of this market in Europe to be
distribution challenges. approximately €21 billion, based on analysis of available detailed
data. TNT has the highest market share in Europe (17%),
As a result of the ageing population, spending on healthcare will followed by DHL (16%), UPS (8%) and La Poste (7%).
increase significantly. In addition, there is a trend towards more
biopharma products and an increased need for special handling
services in healthcare. These trends have several implications
for the transport and distribution industries, such as European Express market
accelerated growth of healthcare product flows, an increasing Excluding intercontinental
demand for to-consumer distribution networks, and possibly
more challenges in attracting and retaining staff. 45.6% Other 16.8% TNT

Restructuring of global supply chains

Driven by globalisation, intercontinental trade is growing
continuously. Multinationals continue to move their
manufacturing to countries with low-cost labour such as 15.9% DHL
China. With an increasing middle class in the emerging
10
Growth through networks countries, spending in those markets will rise, driving
Annual report 2007 regional transportation and global flows as well. In contrast, 8.4% UPS
environmental concerns may eventually lead to a renewed
CHAPTER 2
General review of regionalisation of manufacturing and regional “self 6.9% La Poste
the company in 2007 sufficiency” models. 1.9% FedEx 4.4% Royal Mail
Key value drivers for the express market can be broken down expansion, and investments in new hub facilities. They are also
into three categories: growth, pricing, and cost. The main beginning to focus on the domestic market, although TNT with
growth drivers for the express market are GDP growth (+), its dense network and over 1,100 depots in China continues to
increasing globalisation of supply chains (+) and a shift to be far ahead of its international competitors in this area.
deferred services (-). Important pricing drivers are
consolidation (+) and intensifying competition (-). Key India
cost drivers are increasing scale economies through The express sector benefited from India’s further integration
consolidation and organic growth (+) and a potential for into the global economy and development of the domestic
network optimisation (+). market. It also emerged as a competitive express market with a
trend of market consolidation through strategic acquisitions.
There are essentially two types of express players: the four For instance, FedEx acquired Pafex, while UPS formed an
global integrators UPS, FedEx, DHL and TNT Express, and alliance with AFL. Again, as in China, TNT offers a more
local/regional players, with standard parcel operators (often comprehensive network for domestic services.
related to postal incumbents) and Less-Than-Truckload (LTL)
operators as potential new sub-regional entrants. Americas
As a result of the slowing US economy and uncertainties in the
Express economic financial markets, the industry experienced moderate growth
for domestic services. Double digit growth was however
environment in 2007 achieved by most operators from premium and international
services into Europe and Asia.
Whilst the year 2007 showed strong economic growth at the
beginning of the year, it ended with increasing uncertainties as a South America
result of the turbulence in the financial markets and with an In South America, there was good growth in Brazil due to the
estimated global GDP growth just under 5%. For the appreciation of the currency and the strong car market.
transportation and express industry 2007 was a good year However, the overall GDP growth, whilst still around 5%, was
despite the year-end slow down and the US economy lower than in 2006, due to the other currencies’ depreciation
weakening. Volumes remained strong with double digit growth and the slowdown in the US economy, which is the main
rates fuelled by growth from the emerging markets. trading partner.

Europe
It is estimated that Europe GDP growth in 2007 was in line with
Mail markets
or just below 2006 at around 3%. The European express market The mail sector in Europe, in which TNT Post operates,
is estimated to have grown faster than economic growth, yet has a market size of approximately €60 billion and is still a
modestly in comparison to the fast growing express markets in highly regulated domestic sector, with incumbent operators
emerging markets like Asia. As a result of globalisation and that are protected from competition in many countries
export expansion the international express services are through their monopolies, especially in Southern and
growing stronger than domestic services at double digit growth Eastern Europe. The size of the market will continue to
rates. Competition in the fragmented European express market decline as a result of substitution of mail products by
intensified further in 2007, and there were signs of further electronic products; this volume decline is most pronounced
market consolidation in the UK and Eastern European markets. in countries where internet penetration is highest, i.e. in
In the mature Western European markets, the focus has been Northern and Western Europe. In the Netherlands, TNT
on improving efficiency, improving customer service, and estimates its market share to be approximately 88%. In other
expanding coverage as well as service levels. Parcel operators European countries its market share ranges between 1%
have continued to edge into the express market, and initiatives (small countries) and 9% (United Kingdom) for addressed mail
such as expansion of parcel shops, drop-off points and parcel and between 7% (Germany) and 48% (small countries) for
stations have illustrated the perceived increased importance of unaddressed mail.
the to-consumer markets.
Going forward, the attractiveness of the mail sector will depend
Asia on the level of liberalisation, which drives competitive intensity.
Economic conditions continued to be favourable in 2007 thanks Once liberalised, the mail business has some barriers to entry,
to strong Chinese and Indian economic growth, which helped notably economies of scale (network density) and scope, and
to boost export expansion. There was continued strong in some cases, technology. These barriers protect incumbents
investment in the region, through acquisitions, expanded to some extent, but are in principle not insurmountable, and
infrastructure, connectivity and enhanced services. China and can be mitigated by selective market approaches, gaining
India are driving growth in the regions, whilst the large Japanese access to the incumbent’s delivery network, and using other
market showed more moderate growth. Other markets such as challenger tactics.
South Korea, Vietnam and the rest of South-east Asia
continued to attract investment and are estimated to accelerate Once new players have entered the market, the market
growth and demand for express transportation. structure tends to be one of a universal service provider
11
maintaining the largest share and one or more focused Growth through networks
China challengers. The increasing number of competitors, competing Annual report 2007
TNT’s major competitors have continued to execute their long mainly on price and to a lesser extent on service, is likely to lead
CHAPTER 2
term investment strategies and expanded their product to increasingly intense competition and declining margins for General review of
offerings by upgrading international connectivity, network the incumbent. the company in 2007
 In Europe, three types of mail companies can be identified: these services (referred to as reserved postal services).
——the incumbents: in most smaller countries they are Dutch and EU regulations prohibit TNT from using the
exclusively focused on domestic activities in mail and revenues from reserved postal services to cross-subsidise
parcels, whereas the largest ones have extended into non-reserved activities.
international mail and parcel activities. Oesterreichische
Post AG is the only listed company in this group. De Post Over 50% of the Dutch mail market is accessible to
(Belgium) and Post Danmark are now partly owned by competition. This is de facto well ahead of most other European
private equity firm CVC. Some incumbents, such as France’s mail markets, even of some that have already legally fully
Groupe La Poste and Italy’s Poste Italiane, also offer liberalised. In the liberalised part of the Dutch mail market,
financial services and own a bank. TNT believes there is no market distortion. This can be
——challengers: they tend to focus on the “easier” market illustrated by two main competitors, each of which has
segments and less complex activities of (unaddressed) bulk full nationwide coverage for end-to-end mail delivery with
mail, allowing them to deliver fewer times a week, collect a growing market share. TNT believes this to be unique
electronically or in high volumes at large corporate clients, in Europe.
and benefit from pre-sorted volumes. From this position,
they increase their service quality and frequency of pick-up, In the Netherlands, TNT’s two main competitors in the
sorting and delivery step by step. addressed mail market, Sandd B.V. and Selekt Mail (the latter
——integrators: only TNT and Deutsche Post have extended is owned by Deutsche Post World Net and Dutch publisher
their home mail base into global express and/or freight and Koninklijke Wegener N.V.), have both built their own
contract logistics activities, as well as selected European nationwide delivery capability based on a delivery frequency
mail markets. of twice a week. TNT estimates that its competitors have
delivered a total of around 800 million addressed postal items in
Most European postal operators were converted into 2007 and that their joint market share was around 12% of the
government owned corporations starting in 1989. Many total volume of the Dutch addressed mail market. TNT expects
governments are now considering privatisation of their national that these competitors will continue to grow.
postal operator. In the process of privatisation there is an active
interest by private equity as well as several industry players. TNT’s domestic Mail business is seasonal in the sense that it is
This may result in a fundamental change in the European postal affected by public and local holiday patterns. The third quarter
landscape and might trigger a consolidation process that will is traditionally TNT’s weakest quarter due to the summer
limit the number of independent postal players. holiday season in the Netherlands, and the revenue in the
month of December is positively impacted by the distribution of
European liberalisation of the postal market is slowly taking Christmas greeting cards and presents.
shape. The final step of the process of gradual liberalisation in
the EU will take place in 2011. A derogation is granted to 11 Due to the efficiency of TNT’s operations and its customer
Member States to open their markets as of 2013. However, a orientation, TNT believes that in spite of liberalisation, it has
level playing field is not to be expected to be established and will continue to retain its leadership position in its home
immediately after liberalisation. Barriers to competition, such market the Netherlands. Adjusting to reduced mail volumes and
as the VAT exemption many incumbents enjoy and other facilitating initiatives to limit volume decline, however, will
market distortions, like (hidden) state subsidies, licensing require a continuous and increased effort to realise cost
conditions and a generally binding high-level minimum wage flexibility in order to remain competitive and sustain TNT’s
(such as the one recently adopted in Germany, which is stable source of revenue and income.
significantly higher than the general minimum wage the trade
unions in Germany were demanding), continue to exist. These A notable event has been the passing of the new postal law in
barriers will make it difficult for new entrants to gradually grow the Dutch Second Chamber of Parliament. The main objective
into a mature and profitable business model. was full liberalisation of the Dutch postal market in January
2008, but the final decision has been postponed given
Closely related to this liberalisation process will be the uncertainty around the true opening of the German market (i.e.
definition of the Universal Service Obligation (USO) and its level playing field). Before the new act can be implemented, the
funding. A further discussion both at national and European Dutch First Chamber of Parliament will have to approve it. This
levels on how the content of universal service is to be shaped in is now scheduled for the first quarter of 2008. The enactment
the future is to be expected. The VAT exemption for universal date is dependent on the condition of a level playing field in real
services granted to the universal service provider, which now terms on the postal markets of Germany and the United
leads to substantial market distortion in most Member States, Kingdom and the outcome of the negotiations with regard to
needs close attention. Other forms of non-regulation based the labour conditions for new entrants in the mail market. In
market distortion of full competition are closely monitored by the Dutch postal deregulation some important issues will have
TNT as well. to be settled in lower regulation, such as tariffs for the USO,
and potential network access.
Mail economic environment in 2007 Cross-border Mail
12
Growth through networks The Universal Postal Union (UPU) is a specialised agency within
Annual report 2007 Mail Netherlands the United Nations framework, responsible for the regulation
TNT’s Mail business in the Netherlands is highly regulated, the of cross-border postal services. The common rules applicable
CHAPTER 2
General review of most important details of which are presented in chapter 10. to cross-border postal services are laid down in the UPU
the company in 2007 The current Dutch Postal Act requires TNT to provide the Convention and its regulations. In this Convention, the UPU has
mandatory postal services in the Netherlands at regulated established an international system for mutual payments for the
prices and grants TNT the exclusive right to provide some of delivery of cross-border letter mail, known as the terminal dues
system. However, a significant majority of the European postal
operators are party to the separate, multilateral REIMS II
Customers
agreement where terminal dues are related to a higher TNT strives to be a company that knows its customers
percentage of domestic tariffs and to a certain extent to service extremely well – what they value, their needs and preferences–
quality as well. TNT has not entered into the REIMS II and that responds to them with tailored products and services.
agreement but has concluded commercially oriented bilateral TNT believes that this approach delivers a sustainable
agreements with most of the European postal operators. competitive advantage, as no competitor can replicate the
The REIMS II parties plus TNT and Royal Mail have entered insight and knowledge that TNT has of its customers.
into negotiations with a view to concluding a market oriented
“REIMS III” agreement. The negotiations have been lengthy and TNT aims to exceed the expectations of its customers by
complicated, due to the differences in the domestic market providing distinctive levels of customer care. TNT strives to
circumstances throughout Europe. The resulting agreement, treat its customers in a friendly and professional manner at all
of which only minor details remain to be solved, has not been points of contact and is focused on improvement wherever
signed by TNT, Royal Mail or Correos of Spain. TNT has not possible. Customer needs and levels of satisfaction are
signed the agreement because of the negative effects it will therefore identified through regular contact and structured
have on its competitive position on the Dutch cross-border surveys and TNT takes action on their feedback. TNT
mail market (export and import). encourages all of its people to go the extra mile in their dealings
with customers, knowing that providing exceptional service will
In international postal services, other than reserved postal allow TNT to become distinctive in the market and further
services, TNT faces competition from other public postal improve customer satisfaction and loyalty.
operators and from a wide variety of private, internationally
operating companies. Competition for these services is based TNT Express measures customer satisfaction and loyalty twice
primarily on price and quality of service. a year, reaching at least 60% of the trading account base,
covering all customer sizes from global to small and ad hoc
European Mail Networks (EMN) customers, and covering all lines of business. The measurement
TNT wants to be a pan-European mail distribution provider relates to the key customer satisfaction drivers as stated by
with focus on key markets in Germany and the United Kingdom customers in customer forums. Satisfaction is measured for
and profitable niches in selected other countries. The key each key transaction component from the booking through to
products will be business-to-consumer and business-to- the invoicing process and is analysed independently with an
business transactional mail, direct mail, correspondence and external specialist provider.
publications. The expansion strategy is based on capitalising
on the gradual liberalisation of the European addressed mail Once every quarter TNT Post conducts a customer satisfaction
market and takes into account the regulatory reality and survey among consumers and small and medium sized
competitive situations in each of the EMN countries. enterprises served by the call centre (telephone sales).
An annual survey is conducted among the larger business
Key to further expansion of EMN is the ability to attract the customers. In addition, Intomart GfK annually collects
optimal mix of addressed and unaddressed volumes to be able information from 13,000 customers on four customer values.
to gradually grow into a mature and profitable business model, The final score is calculated by taking the weight customers
unhindered by regulatory and other market distortions such as give to these customer values and multiplying this by the score
the ones mentioned before. In this respect certain events in for each value. The graph below shows the SME final score.
2007 such as the minimum wage developments in Germany From a management point of view this score is more relevant
give cause for concern. For other recent developments in and reliable than the consumer score, and in addition the other
Germany and the United Kingdom, see chapter 4. scores give virtually the same picture.

Parcels The following two charts show the evolution of customer

The European parcels market consists of two sub-segments satisfaction as described above over the last few years for
with different characteristics: to-consumers (B2C) and Express and Mail, respectively.
to-business (B2B). Both segments are still mostly domestic:
cross-border flows are less than 10% of total volume, but this Customer satisfaction Express increasing
percentage is steadily increasing. The business context for these
activities is very different: the market has been fully liberalised 90%
for a number of years, competition is therefore not a new
phenomenon, and volumes, especially in the B2C segment, are
increasing as a result of home shopping and e-commerce. 89%

The parcel activities of TNT Post are fully separated 88%

operationally. In the B2B segment some operators are starting
to offer 2-3 day certain deliveries which approaches some
87%
economy offerings of TNT Express. TNT believes parcels to be
13
an attractive growth opportunity, which, as a result of TNT’s Growth through networks
core understanding of the network nature of this business 86% Annual report 2007
and the current fragmented market, offers opportunities for
CHAPTER 2
value creation. 85% General review of
the company in 2007
Q1 Q3 Q4 Q1 Q3 Q4 Q1 Q3 Q4 Q1 Q4 Q2 Q4 Q2
2002 2003 2004 2005 2006 2007
 Customer satisfaction Mail competencies to deliver performance and enable career
increasing and stabilising around 90% development and personal growth. TNT engages employees to
go the extra mile for its customers, enforcing its company
91% values. As a company TNT will ensure that it rewards
performance according to market practice. TNT strives for a
best-in-class HR community and processes, giving the business
90% the opportunity to attract, motivate and retain the people who
deliver TNT’s current and future results.

89% Inspiring and leading people to a desired level of performance

gives excellent customer experience. The managers of TNT are
expected to treat all of TNT’s people with integrity and respect.
88% They feel responsible for creating the safest possible work
environment, stimulate the development of all, both
professionally as well as personally, and care for their team
87% creating a performance culture which is fun to work in. TNT
will increasingly apply the same thinking to its subcontractors.
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2003 2004 2005 2006 2007
The TNT HR strategy is derived from the business strategy and
includes specified areas for action based on business needs.
Key enablers Management development
Both TNT’s customer experience and employee engagement
Human resources (HR) are strongly dependent on the quality of TNT’s leadership.
Identifying and developing leadership potential is therefore a
TNT aims to make “instilling pride in our people” a living reality. key building block for TNT’s success. TNT uses global
This means that every employee perceives that he or she is instruments on coaching, career development discussions, and
recognised as a valued individual and that TNT consistently talent reviews to ensure a vibrant pipeline of top professionals
supports development of his or her capabilities, skills and and inspiring leaders.

TNT employees divided over countries

2007 total 2006 total (excluding discontinued operations)
6% Other
14% Other 4% Australia & Pacific 44% The Netherlands
1% Africa & Middle East
1% Americas
3% Australia & Pacific
1% Africa & Middle East
5% Americas 39% The Netherlands

44% Rest of Europe

38% Rest of Europe

TNT employees division Express / Mail

2007 total 2006 total (excluding discontinued operations)
0% TNT GHO 0% TNT GHO
1% Other networks 1% Other networks 38% Express

46% Express

14
Growth through networks
Annual report 2007

CHAPTER 2 53% Mail 61% Mail

General review of
the company in 2007
TNT wants the profile of its leadership to be as diverse as forward has to be the result of the consultations with the
its workforce, bearing in mind basics such as high integrity, social partners in the first months of 2008. Mail Netherlands
business and delivery orientation. For this reason TNT has has therefore decided to postpone the engagement survey
established graduate recruitment centres and developed until such clarity is achieved. However, the Mail division still
impactful leadership development practices and programmes considers the engagement survey to be an important tool in
at every management level. Also, in close cooperation with the social policy and will continue to take full interest in the
business schools, TNT will continue to invest in keeping views of all employees, even if these reveal a negative trend.
its management up-to-date in business know-how and It is to be expected that the survey 2008 will again include
leadership capabilities. the Mail Netherlands population. The 2006 results have been
recalculated to ensure like-for-like comparison.
Compensation and benefits
TNT aims to offer an attractive market conform remuneration The company-wide engagement survey undertaken in 2007 shows
package, enabling TNT to attract, retain and motivate key again that TNT’s engagement scores are clearly higher than the
personnel. As the challenges of the company differ, TNT’s industry benchmark and that engagement within TNT is driven by
compensation and benefits approach has a global standard Image, Principles and CSR, Leadership, and Working Relationships
recognising specific circumstances where necessary. (see table below). The 2007 Global Engagement Survey results
show an overall increase of engagement to a level of 76%.
Alignment people decisions with planned growth
A structured approach to employee planning is an essential part Most important findings include:
of the TNT Strategic Planning Process. In this way, TNT aims to ——TNT’s engagement scores are higher than in 2006,
align its people decisions with the business strategy. To be able to ——TNT’s people experience TNT as a special place to work as it
translate the future organisational profile into the necessary visibly and authentically engages with the world around, and
people numbers and characteristics of the future TNT workforce, ——people development and encouraging teamwork by the
an employee planning template is one of the global focus areas. direct supervisor remain powerful drivers for engagement.
Therefore, recruitment and promotion of the most
Mobility competent people remain key.
As mentioned, TNT Mail Netherlands has designed a large-
scale efficiency project driven by decreasing mail volumes.
To realise this programme, TNT Mail Netherlands aims to Benchmark TNT — TP ISR Global
establish a salary package which is more in line with market Logistics Companies Norm
practice, combined with a reduction of 6,500 employees.
Diversity n/a
The aim is to realise this reduction through regular employee Image, Principles and CSR
turnover and voluntary mobility. TNT has put in place a series Competition
Customer Focus
of initiatives to support employees in their search for a job
Engagement
outside of TNT. TNT Mobility is the organisation to which
Immideate Management
employees can turn for individual coaching, training and Working Relationships
vacancies inside and outside the company. During 2007 more Reward & Performance Evaluation
than 2,500 employees voluntarily left the company, over 50% of Work Balance and Conditions
whom were assisted by TNT Mobility. Learning and Development
Leadership
Labour relations
TNT believes in employee dialogue. Trade unions and 0 5 10 15 20 25 30
works councils therefore continue to be valuable partners.
TNT’s labour relations inside and outside Europe have always Health and safety
been strong, and as in 2006 TNT has had very few material As a global transport operator, TNT is faced with a myriad of
work stoppages. health and safety regulations in the countries in which it operates.
TNT management is committed to improving safety by making it
Wages and general working conditions in the Netherlands and management’s top priority and implementing best practices in
the United Kingdom are the subject of centrally negotiated safety management, processes, systems, tools and training.
collective agreements. Within the limits established by these
agreements, TNT’s business units negotiate directly with TNT’s guiding principles are to:
unions and other labour organisations representing its ——provide injury-free, incident-free workplaces,
employees. Collective labour agreements relating to ——foster a culture of prevention where TNT seeks to prevent
remuneration typically have a term of one or two years. This all work-related disabilities and health problems,
year, TNT has an exception to this main rule as TNT extended ——control and minimise risks associated with TNT’s facilities,
the term of the present TNT collective labour agreement in the vehicles and aircraft as well as risks associated with its
Netherlands to 1 April 2008. products and packaging,
——continuously evaluate and improve TNT’s practices, 15
Employee engagement processes and service offerings to make them safe and Growth through networks
The global engagement survey measures whether TNT is acceptable to employees, customers, and the public, Annual report 2007
successful in increasing employment pride and motivation. In ——report health and safety incidents resulting in fatalities and CHAPTER 2
2007, a large part of Mail Netherlands did not participate in this serious injuries to the Board of Management within defined General review of
survey. The reorganisations under discussion within Mail time limits, and the company in 2007
Netherlands lead to uncertainty amongst employees as to what ——achieve certification with Occupational Health and Safety
to expect in the coming period. Clarity on this situation going Standard (OHSAS 18001) in all operating units.
 TNT’s Board of Management is committed to meeting and, where activities and setting high but attainable standards for all TNT
possible, exceeding the minimum standards of health and safety countries worldwide. The framework for achieving and
and is also committed to maintaining a safe working environment. maintaining these objectives is through the management approach
The Board of Management has provided adequate resources and of certifying all TNT’s entities to the OHSAS 18001. However,
has established measurable objectives and targets to maintain and during 2007 the sharp increase in reported fatalities as a result of
continually improve TNT’s health and safety performance. road traffic accidents, particularly evident in the emerging
markets in which TNT has newly acquired business, has raised
Road safety is a crucial part of TNT’s health and safety serious concerns with the Board of Management.
management systems, and the Board of Management is
committed to minimising road related accidents and risks by The number of workplace and road traffic related fatalities is
implementing best practice tools and techniques into all TNT’s shown in the table below.
Year ended at 31 December

Health & Safety 2007 2006 2005

Workplace fatalities 1 1 1
Blameworthy road traffic fatalities with a TNT employee involved 5 1 5
Non-Blameworthy road traffic fatalities with a TNT employee involved 2 2 2
Road traffic fatalities with a subcontractor involved 34 11 14

32 of the 42 reported fatalities in 2007 occurred in the newly For all of TNT’s recent acquisitions, a clear transition programme is
acquired companies in China, India, and Brazil, where standards and in place. Dependent on the specific situation, TNT will either leave
legislation governing road safety are lower than those of TNT’s in place the existing local brand for the near future, co-brand or
established entities and locations. The Board of Management finds quickly fully rebrand to TNT.
this unacceptable and is committed to ensuring that all efforts are
made to minimise the risks to TNT’s employees and subcontractors
(and other road users) by ensuring that the fleet of vehicles is safe and
Social Responsibility (SR)
well maintained and that TNT’s drivers and subcontracted drivers TNT’s mission states among other things that TNT seeks to share
are fit and qualified to operate the vehicles. The Board of responsibility for the world in which it operates. TNT benefits from
Management also acknowledges that accidents do happen and globalisation and the increase in international flows of goods that is
ensures that when they do, they are fully investigated and any a result. As distances between the continents shrink, all inhabitants
lessons learned are implemented immediately. of this planet are becoming neighbours. This means the problems
of the developing nations are also the problems of the industrialised
Brand part of the world, which creates a responsibility TNT feels
as a company.
TNT believes it is now a highly relevant, high esteem brand for
its customers in the Netherlands. Outside the Netherlands and The Board of Management is actively involved in developing SR
especially outside Europe, TNT, as many other brands in delivery policies across the company, including setting SR targets for
services often regarded as low-end still faces insufficient management and linking them to their incentive schemes.
differentiation. Therefore from 2008 onwards, TNT will
better articulate what makes TNT unique, both internally as TNT is convinced that any actions a company undertakes to
well as externally. help address a major problem in the world can be a source of
pride for its employees, as well as having a positive influence on
TNT has a strong corporate culture to leverage from, with a company’s reputation. These are vital factors for a company in
employees proud to be part of TNT and strongly believing in the a services industry, where success is a direct result of
goals and objectives of the company. After the rebranding in 2006, employees’ engagement and customers’ trust.
the entire organisation has become remarkably orange both on
the inside and the outside. TNT is in ongoing dialogue with all stakeholders. Their views
and demands influence the way TNT develops its business. In
TNT positions its brand in a way that best describes its ‘heart and recent dialogues TNT has seen a shift in emphasis towards health
soul’: TNT is a global express and mail company that approaches and safety, the environment, responsible corporate citizenship
its work with one simple attitude, an attitude of ‘can-do’. This and sustainability.
attitude makes TNT the partner of choice for customers who
want items, be it a few or a million, moving from A to B reliably, In 2007 TNT was externally recognised for its efforts in
rapidly and without concern. This attitude is however bigger than sustainability and SR: TNT achieved the leadership position in its
A to B. It matches TNT’s customer experience focus and makes super sector in the DJSI, with the highest score of any company in
TNT a valuable partner for the world, for which it feels this Index.
responsibility. This positioning will support TNT in entering new
16 Implementing international standards
Growth through networks markets and attracting the customers and employees it wants.
Annual report 2007 Implementing international standards is the basis of TNT’s SR
Consistent application of TNT’s brand architecture or hierarchy, strategy and its activities in this field. Its strategy is clear: TNT
CHAPTER 2
General review of consisting of a master brand supported by divisional, business improves its performance as a responsible employer through the
the company in 2007 or legal descriptors, enables TNT to deal successfully with implementation of a set of five standards and management systems:
divisions and business units operating in very different but still ISO 9001 (quality), ISO 14001 (environment), OHSAS 18001
related markets. (health & safety), SA 8000 (labour standards and personnel rights,
only in non-OECD countries) and Investors in People (training and
employee development).
Year ended at 31 December

Certificates (% based on FTEs) 2007 2006 2005

OHSAS 18001 87% 82% 23%
Investor in People (based on headcount) 83% 79% 82%
SA 8000 98% 48% 5%
ISO 9001 91% 80% 77%
ISO 14001 88% 65% 52%

Newly acquired companies are excluded from the challenge ——funding: the performance on raising cash funds is solid; joint
of full certification for a three year period. For 2007, Hoau, results in terms of raising WFP’s private sector fundraising
Speedage and Mercúrio are excluded. capabilities are impressive, and
——reputation building: TNT’s external reputation score and
Implementing these systems allows TNT to work in a internal employee satisfaction levels were boosted as a
structured manner on continuously improving its performance result of the partnership.
in these areas: it provides TNT with good quality data and clear
key performance indicators (KPIs), as well as evaluation and More broadly stated, the partnership positively influenced
benchmarking processes. TNT nearly completed the management rigour at WFP and provided an additional sense of
implementation in 2007. In 2008 TNT will continue to integrate purpose to TNT. Based on the evaluation and constructive
these KPIs into its management’s incentive schemes. discussions with WFP, TNT has recently re-stated its
commitment to WFP, thereby confirming TNT’s decision to
There are still challenges: the companies TNT acquired in continue the partnership.
China, India and Brazil will have to work hard to be able to
meet TNT’s standards within three years after the acquisition Planet Me, the second initiative and launched in January 2007,
date. Another challenge is TNT’s subcontractors. They are is a CO2 reduction programme. Climate change may be the
involved in a substantial part of TNT’s revenues, yet for many of biggest challenge the world is facing today. Most scientists agree
them implementation of TNT’s standards could be a burden climate change is caused by the increased emission of
because of the limited size of their operations or cost issues. greenhouse gases, mostly CO2 . As transportation is responsible
However, TNT will stimulate them to start reporting on for 18% of total CO2 emissions in the world, TNT feels that it
TNT’s key KPIs in SR. has a special responsibility in this regard to pro-actively
minimise the impact of its operations.
Improving the industry
TNT sees a clear interest in improving the sustainability TNT’s stakeholders are involved as well. TNT anticipates
performance of the transportation industry as a whole. To legislation that will enforce greener transportation.
contribute to this, TNT actively participates in the Logistics & TNT also increasingly sees restrictions being created to
Transport Sustainability Group (LTSG) of the World Economic stimulate clean inner city distribution, for instance in London,
Forum. TNT uses the results of its stakeholder dialogues as but also in Rotterdam and in other cities. Since TNT’s
input for its discussions with its competitors. TNT attempts services are part of their supply chain, customers demand
to reach agreement on sustainability KPIs that all members of that TNT increases the transparency of its CO 2 footprint
the LTSG will report on and on one approach towards (per customer, per parcel, per route) and again, that TNT
subcontractors, so customers will be able to benchmark improves its relative and absolute performance. This will over
TNT’s industry’s sustainability performance. time become a qualifier for the licence to operate for both
TNT and the industry.
Differentiating ourselves
TNT’s SR strategy also aims to differentiate TNT through Planet Me consists of three projects: Count Carbon, Code
inspiring initiatives on responsible corporate citizenship. Orange and Choose Orange.

The first of these initiatives is TNT’s partnership with the Within Count Carbon, TNT will install a consistent model and
United Nations’ World Food Programme (WFP). TNT has been process to manage, measure, and report on CO2 throughout
an active partner of WFP, the world’s largest humanitarian aid TNT. TNT’s operational commitment is called Code Orange.
agency, for five years now. During this time TNT has committed TNT is working hard to reduce CO2 emissions in every segment
its knowledge, skills and resources to helping WFP. Over this of its operations. To achieve this TNT is in the process of
period, TNT has invested €38 million in the partnership. In formulating a set of practices. The third and most innovative
addition, fundraising by TNT’s employees added €9 million to part of TNT’s initiative is the way in which it wants to involve its
the partnership. An evaluation shows that the partnership has employees in TNT’s CO2 reduction efforts. TNT wants to
fulfilled its objectives to different degrees: strike a deal with its people: TNT will show them what TNT as
——improving logistics efficiency: results are mixed, but the a company is doing and then TNT wants to challenge them to
17
implementation rigidity is improving and the recipe for take this approach at home as well. This approach TNT calls Growth through networks
achieving more impact is now better understood, Choose Orange. Annual report 2007
——saving and improving lives: flagship initiatives such as the CHAPTER 2
volunteer programmes ‘School Feeding’ and ‘Emergency In 2007, TNT total CO2 footprint including acquisitions and General review of
Operations’ have helped thousands and resulted in subcontractors is almost 2,500 kilotonnes. In the table the company in 2007
more than the symbolic target of one beneficiary per hereafter we excluded the acquisitions and subcontractors
TNT employee, emissions for comparibility reasons.
 Year ended at 31 December

Environment 2007 2006 2005

CO2 emission / revenue (tonnes CO 2 / € 1,000) 0.17 0.14 0.12
CO2 emission absolute (ktonnes) 1,019.2 1 825.6 715.2
Sustainable electricity (% of total electricity) 11.0% 9.8% 3.5%
1 – Excluding Expresso Mercúrio S.A., Huayu Hengye Logistics Company Limited, ARC India Private Ltd. and excluding subcotractors

Integrity Awareness and compliance are enhanced by communication

In January 2006, TNT’s Board of Management launched the and web-based and interactive training. Interactive integrity
TNT Integrity Programme and senior management took on workshops have been held for senior and higher management in
the responsibility for the roll-out of the Programme. all parts of the world. Senior managers, on the basis of the
“train the trainer” principle, thereafter cascade this training and
TNT’s Integrity Programme consists of four parts: guidance, communication down into their organisations, thus fulfilling
awareness and compliance, embedding, and monitoring. their responsibility for the roll-out of the Integrity Programme.

Guidance is set out in the TNT Business Principles which have The TNT Business Principles and related group policies are
been formally adopted and approved by the Board of Management being embedded in TNT’s strategic and operational decision
and Supervisory Board. The TNT Business Principles, together processes. See for more details chapter 6 under Controls
with other integrity-related group policies and procedures are and procedures.
published on TNT’s corporate website. These group policies
deal with topics such as compliance with laws and regulations, The TNT Integrity Programme is monitored in several ways.
accurate and timely disclosure, transparency, equal opportunities, See for more details chapter 6 under Controls and procedures.
fair treatment, conflict of interest, corruption, fair competition,
and social responsibility. Among TNT’s integrity-related group TNT’s score for its approach to Codes of Conduct and
policies and procedures are the TNT Group Policy on Compliance in the Dow Jones Sustainability Index was 100%.
Whistleblowing and the TNT Group Policy on Disciplinary TNT is, of course, proud of this recognition, and will continue
Actions. The latter policy makes clear that non-compliance to devote its energies to the roll-out of its Integrity Programme
with TNT’s group policies will not be tolerated. in order to further enhance its strong ethical culture.

18
Growth through networks
Annual report 2007

CHAPTER 2
General review of
the company in 2007
Revenues and earnings group
Group consolidated results
Year ended at 31 December

Consolidated group results 2007 variance % 2006

Total operating revenues 11,017 9.5 10,060
Other income 75 15.4 65
Total operating expenses (9,900) (11.9) (8,849)

Total operating income 1,192 (6.6) 1,276

as % of total operating revenues 10.8 12.7

Net financial expense (94) 100.0 (47)

Income taxes (316) 20.0 (395)
Results from investments in associates 1 116.7 (6)

Profit for the period from continuing operations 783 (5.4) 828
Profit/(loss) from discontinued operations 206 231.2 (157)

Profit for the period 989 47.4 671

Attributable to:
Minority interests 3 200.0 1
Equity holders of the parent 986 47.2 670
Earnings per ordinary share (in cents) 1 257.4 61.6 159.3
Earnings per diluted ordinary share (in cents) 2
256.1 62.0 158.1
(in millions, except percentages and per share data)
1 – In 2007 based on an average of 383,028,938 of outstanding ordinary shares (2006: 420,701,641). See note 32.
2 – In 2007 based on an average of 385,071,986 of outstanding ordinary shares (2006: 423,859,222). See note 32.

In 2007, TNT had total operating revenues of €11,017 million both the result for the period and the post-tax result on the
(2006: 10,060). TNT’s Express division accounted for 59.5% actual disposal of the asset held for sale.
(2006: 57.2%) of TNT’s group operating revenues and 50.3%
(2006: 43.9%) of TNT’s group operating income. TNT’s Mail Key factors
division accounted for 38.4% (2006: 40.4%) of TNT’s group Key factors that affect TNT’s financial results include:
operating revenues and 52.5% (2006: 59.6%) of TNT’s group ——the volumes of mail TNT delivers,
operating income. ——the number of shipments transported through
TNT’s networks,
Total operating revenues increased by 9.5% in 2007 compared ——the mix of services TNT provides to its customers,
to 2006. Operating income decreased by 6.6%, mainly due to ——the prices TNT obtains for its services,
restructuring costs of €110 million for the efficiency projects that ——the average number of working and delivery days in a year,
TNT’s Mail division intends to start in 2008 to standardise the ——the speed of TNT’s network expansion,
collection, preparation, and delivery of mail as much as possible. ——TNT’s ability to manage TNT’s capital expenditures,
——operating expenses,
On 30 October 2006, TNT announced the decision to divest ——TNT’s ability to match its operating expenses to shifting
its freight management business. TNT’s freight management volume levels, and
business is therefore reported as discontinued operations/assets ——TNT’s ability to integrate acquisitions.
held for sale. On 16 November 2006, TNT signed a Sale and
Purchase Agreement to sell its freight management business unit TNT’s Express and Mail businesses provide services to
to the French logistics service provider Geodis SA. On 5 customers and account for revenues for those services on a
February 2007 the sale was completed. In the statement of daily basis. Results of operations are therefore influenced by the
income for 2007 a profit on discontinued operations of €206 average number of working and delivery days in a year.
million is reported which represents the book gain on the
19
transaction. The result for the period for the discontinued freight TNT uses total revenues, i.e. net sales plus other operating Growth through networks
management business from 1 January 2007 up to 5 February 2007 revenues, to assess the performance of its business. Annual report 2007
amounted to zero. TNT believes that other operating revenues, which consist
CHAPTER 2
primarily of rental income from temporarily leased-out General review of
In 2006 the loss from discontinued operations was €157 million property and passenger/charter revenues, are a recurring the company in 2007
and related to the discontinued logistics and freight management element and TNT allocates them to its businesses when
businesses. The loss from discontinued operations relates to reviewing their performance.
 TNT attributes revenues and expenses to its businesses based
on the underlying nature of the transaction that gave rise to
the revenue or expense and the business involved. TNT calls
revenues and expenses that it does not allocate to businesses
“non-allocated”. These revenues or expenses occur at the
group level, and TNT does not consider them part of the
businesses operations. This method of allocating revenues
and expenses is consistent with how TNT internally manages
its businesses.

Year ended at 31 December

Operating revenues by segment 2007 variance % 2006

Express 1 6,551 13.8 5,758
Mail 4,234 4.2 4,065
Other networks 1 256 0.0 256
Non-allocated and inter-company (24) (26.3) (19)

Total operating revenues 11,017 9.5 10,060

(in millions, except percentages)
1 – Comparative figures have been adjusted to reflect the transfer of Innight from Express to Other networks in 2007.

Year ended at 31 December

Other income by segment 2007 variance % 2006

Express 1 9 125.0 4
Mail 64 10.3 58
Other networks 1 2 0.0 2
Non-allocated 0 0.0 1

Total other income 75 15.4 65

(in millions, except percentages)
1 – Comparative figures have been adjusted to reflect the transfer of Innight from Express to Other networks in 2007.

Year ended at 31 December

Operating income by segment 2007 variance % 2006 1

Express 599 7.0 560
Mail 626 (17.7) 761
Other networks 11 57.1 7
Non-allocated (44) 15.4 (52)

Total operating income 1,192 (6.6) 1,276

(in millions, except percentages)
1 – Figures have been adjusted to reflect both the revised allocation of the non-allocated costs using actual incurred costs in 2007 as well as the transfer of Innight from Express to Other
networks in 2007.

Group operating revenues disposals, was responsible for 6.0% of total group operating
Total operating revenues increased by €957 million (9.5%) to revenues growth. The consolidation effect from acquisitions
20
Growth through networks €11,017 million in 2007 compared to 2006. TNT’s Express and deconsolidation effect from disposals accounted for 3.9%.
Annual report 2007 business contributed €793 million and TNT’s Mail business Unfavourable changes in foreign exchange rates negatively
contributed €169 million to this growth. impacted the revenue growth by 0.4%.
CHAPTER 2
General review of
the company in 2007 Organic growth, defined as the growth calculated against 2006 TNT’s Express business achieved 13.8% higher operating
foreign exchange rates and excluding the effect from the first revenues compared to 2006. The improved performance is
time consolidation of acquisitions and the deconsolidation of broadly based across the continents, but mainly due to
continued growth in TNT’s international businesses as well In TNT’s Mail business, operating revenues increased by 4.2%
as special services and further supported by acquisitions. in 2007, mainly due to substantial volume growth in addressed
Express operating income increased by 7.0%, primarily due to European Mail Networks and partly offset by the continued
substantial volume growth, particularly in the international volume decline in addressed Mail Netherlands. The latter
business across all customer segments, and effective cost volumes continued to decline due to competition and
control, including further network optimalisation and continued substitution. The volume decline impact on revenue and
yield improvements. The operating income growth included operating income in Mail Netherlands was mitigated by price
significant integration and start up costs for recent acquisitions effects due to the tariff increase as of 1 January 2007.
in line with expectations.

Group operating expenses

Year ended at 31 December

Operating expenses 2007 variance % 2006

Cost of materials 423 3.4 409
Work contracted out and other external expenses 4,806 15.5 4,160
Salaries and social security contributions 3,608 6.6 3,384
Depreciation, amortisation and impairments 349 9.7 318
Other operating expenses 714 23.5 578

Total operating expenses 9,900 11.9 8,849

(in millions, except percentages)

Total operating expenses increased by €1,051 million (11.9%) to The net effect of acquisitions and disposals realised during 2006
€9,900 million in 2007 compared to 2006. Overall, the organic and in 2007 contributed €226 million (5.4%) in 2007 to the
growth in operating expenses was 7.5%. Included in the total increase. The organic increase of €444 million (10.7%) was
operating expenses is an amount of €110 million which has been mainly related to higher linehaul, pick-up, and delivery costs in
provided for the restructuring cost of the efficiency projects TNT’s Express business to service the higher volumes and
that TNT’s Mail divison intends to start in 2008 in order to improve the quality of service, inclusive of the higher fuel costs
standardise the collection, preparation and delivery of mail as from commercial linehaul and subcontractors. It is,
much as possible. After coordinating with the trade unions and furthermore, primarily related to the volume growth of
works councils, TNT has decided that the employees who are European Mail Networks in TNT’s Mail business. The increase
subject to these efficiency measures can make use of the was partly offset by adverse changes in foreign exchange rates
provision of the collective mobility agreement. This social plan of €25 million (0.6%).
comprises a wide range of measures making it possible to carry
out the planned reduction in the number of employees in a Salaries, pensions and social security contributions increased by
socially responsible manner. €224 million (6.6%) in 2007 compared to 2006. Acquisitions
realised during 2006 and in 2007 contributed €101 million (3.0%)
In addition, included in the total operating expenses is an to the increase. Salaries, pensions and social security contributions
amount of €28 million, including an amount of €5 million for increased organically by €131 million (3.9%) mainly as a result of
impairment of various assets, relating to the cost of downsizing restructuring costs of €110 million for the efficiency projects that
and transferring the onerous UK Parcel contract underlying TNT’s Mail division intends to start in 2008 to standardise the
related operations of TNT’s Mail division to Parcelnet Ltd. collection, preparation, and delivery of mail as much as possible
and acquisitions realised during 2006 and in 2007. The increase in
The net increase due to acquisitions realised during 2006 salary costs due to wage increases in accordance with collective
(including JD Williams & Company Ltd, Trespertrans S.L. labour agreements are offset by lower pension expenses in 2007
(TG+), Speedage Express Cargo Services) and realised in 2007 and by a reduction of average full-time employee equivalents
(including Expresso Mercúrio SA (Mercúrio) and Hoau Group (FTEs) in the Mail division in connection with TNT’s continuous
of China (Hoau)) was 4.8%. Changes in foreign exchange rates actions to offset lower volumes with efficiency measures. The
had a positive (lowering) effect of 0.4%. trend of replacing more expensive labour with less expensive
labour to reduce operating costs in TNT’s Mail division also
Total cost of materials increased by €14 million (3.4%) in 2007 continued in 2007. The increase was partly offset by adverse
compared to 2006. Organically, cost of materials increased by changes in foreign exchange rates of €8 million (0.2%).
€7 million (1.7%) in 2007, mainly due to higher fuel costs in
TNT’s Express division. The net effect of acquisitions and Depreciation, amortisation and impairments increased by €31
21
disposals realised during 2006 and in 2007 was an increase of million (9.7%) compared to 2006. The organic increase as a result Growth through networks
€9 million (2.2%). of capital investments amounted to €10 million (3.1%), and Annual report 2007
include a €5 million impairment in TNT’s UK Parcel operations.
CHAPTER 2
Work contracted out and other external expenses relate to The net effect of acquisitions and disposals realised during 2007 General review of
fees paid for subcontractors, external temporary staff, rent and and 2006 increased these costs by €22 million (6.9%), of which €9 the company in 2007
leases. Total work contracted out and other external expenses million relates to amortisation on intangible assets of acquisitions
increased by €646 million (15.5%) in 2007 compared to 2006. done in 2007.
 Other operating expenses included items such as marketing Operating revenues in TNT’s business entity Other networks
expenses, other restructuring costs, insurance costs and remained stable compared to 2006 and amounted to €256
various other operating costs. Other operating expenses million. Operating income increased with 57.1% from €7 million
increased by €136 million (23.5%) in 2007 compared to 2006, in 2006 to €11 million in 2007. This increase was mainly caused
mainly due to the acquisitions in TNT’s Express division as well by various cost reduction programmes.
as the growth in TNT’s European Mail Network business.
Other operating expenses increased organically by €77 million In 2007, non-allocated operating costs amounted to €44 million
(13.3%) in 2007, mainly due to the €23 million cost of (2006: 52). Included in these costs is €13 million (2006: 14) for
downsizing and transferring the onerous UK Parcel contract business initiatives, which mainly relates to investigations to
underlying related operations of TNT’s Mail division to optimise TNT’s network strategy introduced in 2005 and costs
Parcelnet Ltd. The net effect of acquisitions and disposals relating to an initiative to further drive value “below the line”.
realised during 2007 and 2006 increased these costs by Cost made to support the World Food Programme (WFP) and
€63 million (10.9%). Planet Me amounted to €10 million (2006: 8). Included in the
cost for WFP are costs for knowledge transfer, hands on
support, raising awareness and funds for the World Food
Group operating income Programme including cash donations. Planet Me is a TNT
initiative to have an active contribution to reduce CO2 emission
Total operating income for the group was €1,192 million in to avoid further global warming. The other cost were €21 million
2007, a decrease of 6.6% compared to 2006. TNT’s Express (2006: 30), which represent a decrease of €9 million which
business contributed €599 million to the total operating mainly relates to lower costs for tax investigations.
income, which is an increase of 7.0% compared to 2006. TNT’s
Express business is further described in chapter 3. TNT’s Mail Acquisitions to expand TNT’s Express and European Mail
business operating income decreased by 17.7% to €626 million, Networks realised during 2006 and in 2007 had an adverse effect
on balance largely due to €110 million restructuring costs for of €22 million (1.7%) on TNT’s operating income in 2007.
Master Plans and is further described in chapter 4. Foreign currency movements during the year had in total no
effect on TNT’s operating income.

Group financial income and expenses

Year ended at 31 December

Net financial (expense)/income 2007 variance % 2006

Interest and similar income 97 (51.3) 199
Interest and similar expenses (191) 22.4 (246)

Net financial expense (94) (100.0) (47)

(in millions, except percentages)

Interest and similar income of €97 million (2006: 199) mainly Interest and similar expense of €191 million (2006: 246) mainly
relates to interest income on bank accounts, loans and deposits relates to interest expenses on short term debt of €79 million
of €69 (2006: 109) million, of which €58 million (2006: 93) (2006: 117), of which €58 million (2006: 93) relates to a gross
relates to a gross up of interest on cash pools (fully offset by an up of interest on cash pools (fully offset by an equal amount
equal amount in interest expenses), interest income on funding in interest income), interest expense on long term debt of
TNT’s discontinued business of €1 million (2006: 73), and €75 million (2006: 52), interest on funding TNT’s discontinued
interest income of €8 million (2006: 15) relating to outstanding business of €0 million (2006: 21) and hedge income of
hedges or fair value adjustments. €21 million (2006: 31) relating to outstanding hedges or fair
value adjustments.

Group income taxes

Year ended at 31 December
22 Income taxes 2007 variance % 2006
Growth through networks
Annual report 2007 Current tax expense 269 396
CHAPTER 2
Changes in deferred taxes 47 (1)
General review of
the company in 2007
Total income taxes 316 (20.0) 395
(in millions, except percentages)
Group income taxes amounted to €316 million (2006: 395),
a decrease of 20.0% compared to 2006.
Discontinued operations
Income taxes differ from the amount calculated by multiplying In 2007, the gain from discontinued operations was €206 million
the Dutch statutory corporate income tax rate with the in and related to the discontinued freight management businesses.
come before income taxes. In 2007, the effective income tax The gain from discontinued operations relates to both the
rate was 28.8% (2006: 32.3%), which is higher than the result for the period and the post-tax result on the actual
statutory corporate income tax rate of 25.5% in the disposal of the asset held for sale.
Netherlands (2006: 29.6%). This difference is caused by several
opposite effects. For further details, see note 23 of TNT’s
consolidated financial statements.
Group net income
In 2007, profit for the period attributable to the equity holders
of the parent was €986 million, an increase of €296 million
(47.2%) compared to 2006. This increase was mainly the result
of an increase in the result from discontinued operations of
€363 million offset by a decrease in operating income of €84
million mainly due to restructuring costs in the Netherlands in
TNT’s Mail division.

Net assets and financial position group

2007 variance % 2006
BALANCE SHEETS
Non-current assets 4,823 12.8 4,277
Current assets 2,252 6.1 2,122
Assets held for sale 10 (97.6) 409

Total assets 7,085 4.1 6,808

Equity 1,951 (2.8) 2,008
Non-current liabilities 2,232 5.7 2,112
Current liabilities 2,902 14.2 2,542
Liabilities related to assets classified as held for sale 146

Total liabilities and equity 7,085 4.1 6,808

Net return on equity (%) 1
50.5 33.4
Equity as % of total liabilities and equity 27.5 29.5

CASH FLOW STATEMENTS CONTINUING OPERATIONS

Net cash from operating activities 643 (25.0) 857
Net cash used in investing activities (8) (100.7) 1,068
Net cash used in financing activities (635) 70.5 (2,152)

Changes in cash and cash equivalents 0 100.0 (227)

CASH FLOW STATEMENTS DISCONTINUED OPERATIONS

Net cash from operating activities (19) 69.8 (63) 23
Growth through networks
Net cash used in investing activities 4 113.3 (30)
Annual report 2007
Net cash used in financing activities 16 (55.6) 36
CHAPTER 2
General review of
the company in 2007
Changes in cash and cash equivalents 1 101.8 (57)
(in millions, except percentages)
1 – The profit attributable to the shareholders as a percentage of the total equity.
 Off-balance sheet items Cash flow data
TNT has no off-balance arrangements other than disclosed in
note 29 to its consolidated financial statements. Liquidity and capital resources
Cash and cash equivalents (excluding discontinued operations) The company’s capital resources include funds provided
totalled €295 million at 31 December 2007 (€297 million 31 by TNT’s operating activities and capital raised in the
December 2006). financial markets.

The following table provides a summary of cash flows from

continuing operations:

Year ended at 31 December 2007 variance % 2006

Cash generated from operations 1,313 (1.9) 1,338
Interest paid (178) 10.6 (199)
Income taxes paid (492) (74.5) (282)

Net cash from operating activities 643 (25.0) 857

Net cash used for acquisitions and disposals 177 (85.9) 1,256
Net cash used for capital investments and disposals (284) 9.3 (313)
Net cash used for other investing activities 99 (20.8) 125

Net cash used in investing activities (8) (100.7) 1,068

Net cash used for dividends and other changes in equity (979) 50.5 (1,977)
Net cash from debt financing activities 344 296.6 (175)

Net cash used in financing activities (635) 70.5 (2,152)

Changes in cash and cash equivalents 0 (227)

(in millions, except percentages)

Net cash from operating activities following the sale of the freight management business and
The net cash from operating activities decreased by €214 payments for acquisitions of group companies of €287 million
million from €857 million in 2006 to €643 million in 2007, which for the most significant acquisitions of Mercúrio (€147) and
is mainly due to significantly higher tax payments in 2007. Hoau (€114) in 2007. In 2006, the net cash used for acquisitions
and disposal was largely impacted by the proceeds obtained
Cash generated from operations decreased with €25 million from the logistics business of €1,335 million.
due to a lower profit before tax adjusted for non-cash
movements of €38 million partly offset by a decrease in working Net cash used for capital investments and disposals relates to
capital of €13 million. In 2007, the net working capital increased net capital expenditures on property, plant and equipment of
by €77 million (2006: 90) The increase in 2007 is mainly a result €272 million (2006: 277) and intangible assets of €97 million
of organic growth and acquisitions within the Express and (2006: 103) and proceeds obtained from the sale of buildings
EMN business. and equipment in 2007 of €85 million (2006: 65). The net
expenditures on property, plant and equipment relate mainly to
The total cash out flow for interest paid in 2007 is €178 million. investments in depots, fleet replacements and investments in
In 2007 interest paid mainly includes interest on TNT’s long TNT’s network and exclude the purchase of a Boeing 747 of
term borrowings of €67 million, interest payments of €76 €110 million which is funded by means of a finance lease.
million relating to short term debt, interest paid on foreign
currency hedges of €17 million and interest paid on taxes of The net cash used for other investment activities mainly relates
€11 million. to interest (€85 million) and dividends received (€13 million).

The cash outflow of the total tax payments amount to €492 Net cash used in financing activities
million (2006: 282), of which €166 million related to prior years. In 2007, dividends of €298 million (2006: 282) were paid, being
24
Growth through networks the final cash dividend over 2006 of €183 million and cash
Annual report 2007 Net cash used in investing activities interim dividend for 2007 of €115 million. Together with the
The total net cash used in investing activities amounts to cash paid relating to share buy-back programmes of €710
CHAPTER 2
General review of -€8 million (2006: 1,068). million (2006: 1,747) and received cash payments for the
the company in 2007 exercise of employee stock options of €29 million (2006: 52),
The net cash used for acquisitions and disposals of €177 million the total net cash used for dividends and other changes in equity
mainly relates to the received cash proceeds of €486 million amounted to €979 million (2006: 1,977).
The net cash from debt financing activities amounted to
€344 million and mainly relates to the proceeds on long term
borrowings following the newly issued 5.375% Bond 2017 of
€645 million and newly acquired short term bank debt of
€99 million off set by repayments on TNT’s commercial
paper programme of €287 million and short term bank debt
of €45 million.

Detailed information on capital

expenditures and proceeds

Year ended at 31 December 2007 variance % 2006

Property, plant and equipment 272 (1.8) 277
Other intangible assets 97 (5.8) 103

cash out 369 (2.9) 380

Proceeds from sale of property, plant and equipment 85 30.8 65
Disposals of other intangible assets 0 2

cash in 85 26.9 67
Netted total 284 (9.3) 313
(in millions)

Capital expenditures projection for 2008 Mail is expected to show a low single digit organic revenue
The total projected 2008 capital expenditures on property, increase overall, with an operating margin around 16.5%.
plant and equipment and other intangible assets for TNT’s Emerging Mail and Parcels (excluding EMN Germany), as part of
divisions is estimated to be €450 million, which is expected to Mail, is expected to achieve a low double digit organic revenue
be spent on similar types of property, plant and equipment and increase, with a high mid single digit operating margin.
other intangible assets as in 2007. TNT believes that the net
cash provided by its operating activities will be sufficient to fund So far, TNT sees no evidence of a major slowdown in its
the other capital expenditures. business, which primarily is focused on European markets.
TNT is, however, aware of the risks arising from a possible
Performance evaluation and outlook 2007 recession in the United States. TNT is strongly positioned
Business and financial performance over the year 2007 has been to respond as appropriate and is confident about its
in line with the outlook as provided for the group. Taking into performance for the year 2008.
account the impact of the special item of €110 million provision
for Master Plans in Mail, TNT shows an underlying performance The overall Mail outlook includes expectations and assumptions
on record levels in its operation, with profit from continuing on revenue development and operating margins for EMN
operations increasing to €865 million. Germany on an ongoing basis, which, due to the current legal
and business environment, are more uncertain than usual.
The proposal to increase dividend per share over 2007 with
16.4% reflects the confidence of the Board of Management in The overall Mail margin outlook excludes possible further
the strengths of TNT’s performance. The increase results restructuring charges in the context of Master Plans in the
from an increased pay-out to 36.7% (2006: 35.1%) of normalised Netherlands and decisions on the future of EMN Germany.
net income and a lower amount of eligible shares due to share
buy-back programmes realised. The total proposed dividend TNT expects non-allocated costs to stay at around €35 million
over 2007 of €316 million is an increase of 8.2% compared for the year.
to 2006.
TNT’s outlook is based on constant 2007 exchange rates.
Outlook 2008
The outlook for 2008 is structured to enable specific insight
in the development of TNT’s established businesses and
25
emerging platforms. Growth through networks
Annual report 2007
Express is expected to show a high single digit organic revenue
CHAPTER 2
growth in International and Domestic, with a low double digit General review of
operating margin. The Express Emerging Platforms are the company in 2007
expected to deliver organic revenue growth in the high teens,
with a low single digit operating margin.
 the Express
division
2007 —
Annual report

General
TNT’s Express division provides on-demand door-to-door products to its customers, which can be divided into small and
express delivery services for customers sending documents, medium enterprises, major account and global customers. Each
parcels and freight. TNT offers regional, national and worldwide category of customers is managed by dedicated teams and
express delivery services, mainly for business-to-business processes. TNT builds strong relationships with its customers
customers. The Express services TNT provides and the through regular personal calls and visits, as well as a wide range
prices TNT charges to customers are primarily classified by of communications media.
transit times, distances to be covered and sizes and weights
of consignments. TNT offers a comprehensive range of The principal Express facilities are as follows:

Location Owned / Financial Lease Principal Use Site Area

Liège, Belgium Owned 1 International air hub 99,685 sq. metres
Wiesbaden, Germany Owned Sorting centre and road hub 65,500 sq. metres
Arnhem, the Netherlands Owned International road hub 146,722 sq. metres
Brussels, Belgium Lease Sorting centre and road hub 67,150 sq. metres
1 – The land is on a long term operating lease.

The following aircraft are in use:

Strategy and actions
The ambition of TNT’s Express division is to be the leader in
Type Total number Total capacity (kilos)
day certain and time certain door-to-door transport for its
Owned 27 431,100 business-to-business clients with the widest geographical
Leased 18 484,000 coverage.
Chartered 2 27,700
TNT is a global express player, whose strategic intent is to:

Total 47 942,800 ——strengthen its number one position in Europe in national

and intra-European flows,
——build volumes from China to fuel its European network
and establish an intra-China network,
26
Growth through networks ——build the number one position in selected emerging
Annual report 2007 markets like India, Brazil and China, and
CHAPTER 3
——expand its position in special services: a range of flexible and
The Express value added solutions that are complimentary to its network
division services. These services are tailored to the customers’
requirements and range from time critical and freight
transportation to special handling and distribution services.
To achieve these goals, the objectives of TNT’s Express The new unified product portfolio gives customers the widest
division are to: range of morning delivery services in the world and gives
TNT significant competitive advantage. Together with its
——achieve profitable revenue growth through volume Express and Economy Express day-definite services and
acquisitions at the optimal price, Special Services TNT can meet and exceed all of its customers’
——maintain a balanced customer portfolio (large, medium, needs worldwide.
small and ad hoc customers),
——focus on product performance, The focus on customer experience was launched at the
——improve cost effectiveness, beginning of 2007, and technology and business system
——ensure quality in all key areas, solutions have been exploited to enhance the customers’
——provide high-quality and cost-effective intra-European experience and to capture customer intelligence data to
services through connecting its strong domestic businesses, establish further customer experience improvement initiatives.
——secure outstanding levels of customer satisfaction, Technologies like Speech Self Service allow customers to make
——develop leading-edge support technologies that provide bookings at any time without the need to speak to a customer
added value for customers, services agent. Post-call satisfaction can systematically gather
——strengthen the TNT brand and increase top-of-mind data relating to the customers’ satisfaction during their
awareness of the comprehensive range of reliable exchanges with TNT. Web-based self service products for
on-demand Express delivery services provided by the tracking and service information continue to be a strong
company, and channel of self service, with TNT’s web tracker exceeding one
——recruit, develop and manage its employees towards the million hits for the first time in a single week during 2007.
highest standard of customer care.
With the roll-out of the latest technology in video conferencing,
TNT’s strategy Focus on Networks consists of two phases. In TNT has not only reduced air travel costs but has also made a
the first phase, completed end of 2007, TNT’s Express division positive contribution to reducing the environmental impact.
created a strong platform by delivering on all four strategic
intents mentioned above. In the second phase the emphasis will
be on network optimisation to further strengthen the leading
Express Europe
positions of the Express division, to strengthen the Europe-Asia The Express Europe business provides regional, national and
connectivity and to integrate the newly acquired domestic pan-European express services that deliver consignments from
platforms in China, India and Brazil. Europe to the rest of the world as well as time-sensitive
door-to-door products. TNT’s extensive integrated road and
air networks have given TNT a leading position in the European
Business performance market and are an important strategic asset with dense
coverage in 34 European countries. TNT expanded its
In 2007, TNT’s Express business produced a strong European network in 2007 and continued to introduce uniform
performance driven by TNT’s international businesses and best practice approaches throughout the organisation.
supported by a balanced customer portfolio, growth in TNT’s
global accounts, improved network optimisation and careful In Europe, TNT provides on-demand expedited door-to-door
cost management. Recent acquisitions performed in line with delivery services that involve carrying documents, parcels and
TNT’s expectations. The strong results (excluding the planned freight for its European customers. The shipments are collected
start-up costs of TNT’s recent acquisitions) show a by a fleet of vehicles that make either scheduled stops or
continuation of previous years’ results which have seen on-demand collections upon receipt of customer telephone or
continuous improvement in operating margin. internet requests. Shipment and consignment details are sent to
the nearest depot in TNT’s network. Details of each shipment
Technology and business system solutions remain to be critical are entered into TNT’s track-and-trace systems either through
elements and enablers in achieving the business strategy. The scanning, data entry or electronic data interchange methods.
global SAP back office roll-out was recognised with SAP The customer can access the information through internet or
presenting TNT with the prestigious quality award for best proprietary customer interface technology. Each shipment is
global roll-out in 2007. then sorted by destination and consolidated with other
customers’ consignments. Depending on its destination, each
Standardisation throughout TNT’s global organisation shipment is transported on a linehaul (i.e. air or road transport
continues with the development of common systems. between TNT depots/hubs) to a domestic road hub, an
Implementation of these systems commenced in 2007 with the international road hub or one of the airports from which TNT
first modules being delivered and implemented in several operates, generally within two hours of arrival at the depot.
European countries. Further modules have been developed and
implementation will begin in 2008. TNT transports intra-European shipments from the collecting
depot by road or on one of the aircraft owned or leased by TNT
In September 2007, TNT launched a new service portfolio to from an origin airport to TNT’s main air Express sorting hub in
offer customers an extended range of standardised Liège, Belgium. If transit times so permit, shipments that do not
27
international and domestic services across the globe. Two new travel by air are carried by truck to one of TNT’s 10 main Growth through networks
time-guaranteed services, “10:00 Express” and “12:00 Economy European road hubs. TNT unloads and sorts the shipments and Annual report 2007
Express”, were added. TNT now offers more morning consolidates them with other consignments for each
CHAPTER 3
deliveries than any of its competitors and has the opportunity destination and then puts them on outbound linehauls for The Express
to become known as the company to use for all morning movement to the delivery depot. TNT moves domestic division
deliveries. The “12:00 Economy Express” in particular is an consignments within major European countries from the
industry first, providing customers with a service that is both collection to the delivery depot, either directly or via a
economical and time guaranteed. domestic hub.
 At the delivery depot TNT sorts the shipments and loads them transportation links. However, in many of the countries TNT’s
on the appropriate delivery vehicle. Proof of delivery is entered global Express services are augmented by domestic and regional
into the Global Link system or other computer system that is express delivery services.
updated at every point in the process. This enables TNT to
notify the customer when the consignee has received the In China, 2007 has been a landmark year with several notable
shipment. TNT’s track-and-trace systems, including the Global initiatives. In February, TNT started to fly its own 747 Extended
Link system, enable TNT to offer an automated proof-of- Range Freighter between Shanghai and its European air hub in
delivery service and customers can access the information Liège. This now gives TNT a market leading value proposition
through internet or proprietary customer interface technology. for its customers in both China and Europe. In March, TNT
completed the acquisition of Hoau, one of the country’s largest
TNT’s sales channels consist of field sales, major accounts, and leading domestic road freight companies. TNT now boasts
global accounts and postal alliances. Major accounts focus on a solid market position in both the international and domestic
national major accounts and TNT’s global account managers markets and will build further on this platform to create market
maintain a portfolio of TNT’s largest multinational accounts. winning services for its customers. TNT now operates the
TNT also enters into alliances with major postal operators largest network of any of its competitors in China with over
which offer TNT’s services to their customers. 1250 depots in the country. These are served by three
international gateways and 56 domestic hubs.
TNT has a more extensive Express delivery road network in
Europe than any of its competitors. Through its integrated road TNT China was awarded the coveted Investor in People Award,
and air networks, TNT is able to offer a range of fast and which demonstrates the effort and focus TNT puts into the
reliable Express delivery services in most European countries. development of its staff to ensure TNT’s customers receive the
With respect to TNT’s European network, TNT added its own high level of service they demand. Focus on people is key in the
airport connections to Bordeaux (France) and Larnaca (Cyprus) China market place, and TNT is proud of what it is achieving in
in January and March 2007 respectively. In October, TNT this area as it will be the basis of its future performance.
upgraded Gdansk (Poland) and Sofia (Bulgaria) from co-load
operations to TNT own aircraft and moved from Nantes In South-east Asia, double digit revenue growth has once again
(France) to Rennes (France). been achieved. In May 2007, the road network in South-east
Asia was extended into Vietnam, and in December 2007 it was
In 2004, TNT announced a €36 million investment plan for its announced that it is planned to extend further into China in
Liège air hub, which is intended to improve transit times and early 2008. The growth in Economy products as a result of the
increase the percentage of consignments delivered on time and service offered through the network has been strong.
in perfect condition. The project is progressing well with the
new hub building being completed in November 2007. The total In North-east Asia, TNT continues to invest in service and
expenditure as at 31 December 2007 is €33 million. In 2007, coverage. In Japan, TNT has centralised its customer service
TNT completed the extension at Duiven, the Netherlands, of centre in the new Tokyo head office. The service coverage in
the Integrated Direct Express Centre. This 5,000 square metre Japan was also extended during 2007, and TNT now directly
extension costing €7.9 million is to deal primarily with increased serves 14 of the 23 wards of metropolitan Tokyo.
volumes from the increased China to Europe express flows.
In India, the integration of the acquired Speedage business has
In 2007, in Europe TNT continued to leverage off its fully progressed steadily. However, as expected significant
integrated domestic and international networks including its investment in the service and infrastructure has been necessary
best in class European road network and its highly dense in order to bring the operational performance closer to the
European air network. This has enabled good volume growth expected levels. As a result, service performance of Speedage
particularly in the international businesses with higher growth has steadily improved. When fully integrated, the combined
in Northern and Eastern Europe than in Central/Southern TNT businesses in India will offer a market leading integrated
Europe. Detailed internal analysis indicates that TNT has domestic and international coverage of the country.
continued to gain market share in Europe.
Australia performed well across all key areas of operations in
In France, the partnership between TNT Express and Geopost, 2007, with particularly strong revenue growth in international
the holding company for the parcel and express subsidiaries of Express products. Revenue increases across the portfolio were
France’s national service Groupe La Poste, was launched as driven by a combination of targeted new account acquisition,
planned in January 2007 following completion of key systems optimisation of pricing structures, and the successful
integration activities. renegotiation and retention of most expiring major customer
contracts. Stable industrial relations and higher staff
Express Rest of the World engagements and retention served as a platform, along with
improved revenues and tight cost control, for achieving
The Express Rest of the World business provides door-to-door stronger profitability. Infrastructure improvements continued
express delivery of documents, parcels and freight worldwide in with commencement of the first of several capital city depot
all areas outside Europe and from these areas to Europe. TNT’s re-developments which will continue over the next three years.
28
Growth through networks worldwide coverage extends to more than 200 countries. TNT
Annual report 2007 is also building its position in Asia and has further improved In North America, TNT provides international Express
service levels between Asia and Europe. services in 15 of the top metropolitan areas. Building on its
CHAPTER 3
The Express own delivery network in the North-east business corridor,
division Express Rest of the World operates in a way similar to that of TNT continues to improve next-day delivery services to major
TNT’s Express Europe business line, but relies primarily on business centres, including New York, Washington D.C.,
airlift by commercial passenger airlines for linehaul Chicago and Toronto.
In South America, TNT established a market leadership In the express industry TNT sees that the majority of flows of
position through the acquisition of Expresso Mercúrio S.A. documents and parcels remain within continental boundaries.
(Mercúrio) on 10 January 2007. The company has performed Thus, TNT’s strategy is to build operational excellence within
beyond expectations in its first year. The transformation regions, particularly within Europe and Asia. As TNT expands
process has been very successful with no loss of major its position in Asia, TNT intends to also build leading
customers, high revenue growth, and financial results ahead of connectivity between Europe and Asia.
plan. TNT is now the largest privately held domestic Express
provider in Brazil, the continent’s largest market. The
acquisition is in line with TNT’s strategic objective to become
number one in selected emerging markets and provides the
Financial results
platform to develop an integrated South American road and air In 2007, TNT’s Express division earned revenues of €6,551
Express network. Mercúrio employs 6,500 people across 104 million. The Express division accounted for 59.5% of TNT’s
locations and offers a comprehensive nationwide Express group operating revenues and 50.3% of TNT’s group
service in Brazil. This complements TNT’s well-established operating income.
international Express business in the country.
The following tables set out the financial performance of TNT’s
Express division for the past two years:

Year ended at 31 December

Express financial overview 2007 variance % 2006 1

Total operating revenues 6,551 13.8 5,758
as % of total operating revenues TNT 59.5 57.2

Other income 9 125.0 4

Total operating expenses (5,961) (14.6) (5,202)

Total operating income 599 7.0 560

as % of express operating revenues 9.1 9.7

(in millions, except percentages)

1 – Figures have been adjusted to reflect both the revised allocation of the non-allocated costs using actual incurred costs in 2007 as well as the transfer of Innight from Express to Other
networks in 2007.

Year ended at 31 December

Express operating revenues 2007 variance % 2006

Express Europe 1 4,969 6.8 4,652
Express Rest of the World 1,582 43.0 1,106

Total operating revenues 6,551 13.8 5,758

as % of total operating revenues TNT 59.5 57.2

(in millions, except percentages)

1 – Comparative figures have been adjusted to reflect the transfer of Innight from Express to Other networks in 2007.

Year ended at 31 December

Express operating expenses 2007 variance % 2006 1

Cost of materials 267 11.3 240
Work contracted out and other external expenses 3,252 16.4 2,794
Salaries and social security contributions 1,913 11.3 1,719
Depreciation, amortisation and impairments 209 19.4 175 29
Growth through networks
Other operating expenses 320 16.8 274 Annual report 2007

CHAPTER 3
Total operating expenses 5,961 14.6 5,202 The Express
division
(in millions, except percentages)
1 – Figures have been adjusted to reflect both the revised allocation of the non-allocated costs using actual incurred costs in 2007 as well as the transfer of Innight from Express to Other
networks in 2007.
 Year ended at 31 December

Express operating statistics 2007 2006 2005

Number of consignments (in thousands) 228,199 198,171 179,275
Number of tons carried 7,390,779 4,500,683 3,520,109
Average of number of working days 252 251 253
Number of depots/hubs 2,331 1,195 882
Number of vehicles 1 26,760 22,001 19,747
Number of aircraft 1
47 44 43
1 – A substantial number of the vehicles and aircraft are not owned by us but leased or subcontracted.

During 2007, TNT’s Express division realised higher operating

revenues and improved earnings due to a strong performance
Express operating expenses
in TNT’s international business attributable to TNT’s Operating expenses of TNT’s Express business for 2007
attractive product offering, disciplined pricing and an efficient increased by €759 million (14.6%) compared to 2006. The
sales process. The company continued to invest and integrate organic increase in operating expenses was €409 million (7.9%),
its newly acquired domestic platforms which resulted in a while the effect of acquisitions increased operating expenses by
lower operating margin in 2007. €384 million (7.4%). Foreign exchange fluctuations decreased
operating expenses by €34 million (-0.7%). The organic increase
TNT continued to grow its profit, which was achieved through was driven mainly by the strong international volume growth,
the implementation of standard commercial policies, cost the expansion of TNT’s business in China, Eastern Europe, and
control, including further optimisation of its networks, while India, and the high costs of fuel for TNT’s aircraft, linehaul and
maintaining service levels and the ongoing review of TNT’s pick-up and delivery vehicles. Cost of materials increased by
revenue quality yield against cost inflation. €27 million (11.3%) primarily due to the higher fuel costs
incurred in all business units. Work contracted out and other
Express operating revenues external expenses increased by €408 million (16.4%). This
included the costs of linehaul and pick-up and delivery, which
Total operating revenues of TNT’s Express business for 2007 have increased to service the higher volumes and to improve
increased by €793 million (13.8%) compared to 2006. The the service quality and also included the higher fuel costs
organic growth in operating revenues of TNT’s business was from commercial linehaul and subcontractors. Salaries and
€451 million (7.9%). The acquisitions of Mercúrio and Hoau in social security contributions increased by €194 million (11.3%)
2007 and Speedage in India during 2006 had a positive effect of due to the additional number of FTE’s, including the acquisitions
€376 million (6.5%) on operating revenues. Foreign exchange of Mercúrio and Hoau in 2007 and Speedage during 2006 as well
effects had a negative effect of €34 million (-0.6%), mainly due as salary increases for existing employees. Depreciation,
to the strengthening of the euro against many currencies and in amortisation and impairments increased by €34 million (19.4%)
particular the Chinese Renminbi, the British Pound and most of due to the amortisation of intangibles for the acquisitions, the
the Asian currencies. depreciation of the new Boeing 747’s, as well as the expansions
of TNT’s European air and road network hubs and the
The increase in operating revenues was primarily due to strong development of the SAP back office system. Other operating
growth in European air and road volumes. The growth in these expenses increased by €46 million (16.8%) due mainly to
international (i.e. cross-border) flows continued to exceed the increased travel, consulting and advertising costs.
growth in domestic flows. Within the international flows, the
Economy products grew faster than the Express ones
encouraged by better service and transit times. All customer
Express operating income
segments saw revenue increases. The Express business operating income for 2007 increased by
€39 million (7.0%) compared to 2006. The improvement in
Express Europe operating revenues for 2007 increased by operating income was primarily due to good volume growth,
€317 million (6.8%) compared to 2006. The organic growth in particularly in the international business across all customer
operating revenues was €325 million (7.0%). Most business segments and in Special services, and good cost control despite
units contributed to the increase in operating revenues. In the increase in fuel price. The highest income growth was seen
particular, the Western European countries contributed to in the International based countries while the Domestic based
the majority of the growth in operating revenues. business units, which are generally more developed markets,
Foreign exchange fluctuations had a negative effect of €7 increased at a lower pace. The emerging platform income was
million (-0.2%). below last year’s, impacted by TNT’s investments in
acquisitions. The organic growth in operating income for 2007
Express Rest of the World operating revenues for 2007 was €47 million (8.4%) compared to 2006. The acquisition
increased by €476 million (43.0%) compared to 2006. effects amounted to an €8 million (1.4%) investment and the
30
Growth through networks This was achieved through the €126 million (11.4%) organic foreign exchange impacts had a neutral effect on the income.
Annual report 2007 growth in operating revenues from operations, with
fastest growth in Greater China and Middle East and from Overall operating income as a percentage of Express business
CHAPTER 3
The Express acquisition effects of €376 million (34.0%) from the purchase operating revenues was 9.1% in 2007 compared to 9.7% in
division of Mercúrio in Brazil, Speedage in India and Hoau in China. 2006 mainly due to the investments in TNT’s acquisitions.
Foreign exchange fluctuations had a negative effect of Excluding these recent acquisitions the return on sales over
€24 million (-2.5%). 2007 was 9.8%.
Express capital expenditures
and proceeds
Year ended at 31 December

Capital expenditures 2007 variance % 2006 1

Property, plant and equipment 197 (0.5) 198
Other intangible assets 69 9.5 63

cash out 266 1.9 261

Proceeds from sale of property, plant and equipment 19 375.0 4
Disposals of other intangible assets 2

cash in 19 216.7 6
Netted total 247 255
(in millions, except percentages)
1 – Comparative figures have been adjusted to reflect the transfer of Innight from Express to Other networks in 2007.

The capital expenditures shown in the above table are excluding

the new finance leases, as they do not lead to cash flows. The
finance leases mainly consisted of the acquisition of the second
Boeing 747-400 ERF (€110 million).

Capital expenditure on property, plant and equipment and

other intangible assets by TNT’s Express business totaled
€266 million in 2007, which was an increase of 1.9%
compared to 2006.

Some of the larger Express capital expenditures in 2007

included replacement of assets at the Hamburg depot
(€13.8 million), the Australia fleet replacement (€6.6 million)
and several investments in TNT’s network (Liège hub expansion
- €16.5 million, new TNT airways building - €6.5 million,
one Boeing 747 engine - €7.1 million and an integrated direct
Express centre - €6.4 million).

During 2007, capital expenditures on other intangible assets

totaled €69 million and related primarily to the enhancements
to TNT’s international shared systems and development of the
financial systems (back office) software (€46 million).

31
Growth through networks
Annual report 2007

CHAPTER 3
The Express
division
 of the mail markets are important drivers for TNT’s Mail
strategy. TNT’s data and document management services are
intrinsically designed to anticipate these changes in the mail

the Mail
industry. Over the years TNT has gained a leading market
position in these services, primarily in the Netherlands.

In the mail industry it is TNT’s ambition to be the leading

division
provider of business and consumer related services for
communication, transactions and delivery. TNT wants its
Mail operations to be recognised as the industry benchmark
for quality of service, efficiency and customer service, for
producing the best returns in the industry, and for making
2007 —
Annual report optimal use of both new technologies and European postal
market liberalisation.

TNT’s Mail strategy is targeted at maintaining and taking the

leading position in changing markets. This is driven by two
key elements:

——In the Netherlands, TNT focuses on anticipating the volume

decline due to substitution by new media and the
development of competition. With its customer focus
programmes, TNT will strengthen its customer centric
approach through its sales channels. TNT meets changing
customer demand through product development and price
General and service differentiation. This price/value strategy,
together with the implementation of TNT’s new cost
TNT’s Mail division provides both postal services and mail flexibility measures targeted to save up to €300 million on
related data and document management services. an annual basis as of 2015, are designed to enable TNT to
retain its margins within an acceptable range.
The division is organised around four business lines: Mail ——Outside the Netherlands, TNT will continue to invest and
Netherlands, Cross-border Mail, European Mail Networks and expand in attractive markets along two tracks:
Data and Document Management, the latter operating under ——through an offensive approach, TNT continues to build
the brand name Cendris. an alternative postal company to the incumbent operator
in worldwide selected countries and markets. TNT
Part of the services provided by Mail Netherlands and already offers addressed and unaddressed mail services
Cross-border Mail are of a mandatory nature. As a in main European countries and is recognised as the
consequence, regulatory developments have an influence on challenger to the incumbent. TNT will continue to build
TNT’s business. For a more detailed description of the its position in the most attractive countries to ensure
regulatory environment, see chapter 10. future growth of its Mail business.
——through postal alliances, TNT strives to strengthen its
position by way of cooperation with other organisations
Strategy and actions and postal operators.

TNT’s strategy Focus on Networks consists of two phases. In

the first phase, completed end of 2007, TNT’s Mail division
prepared itself for full liberalisation of the Dutch mail market
Business performance
through price differentiation, the roll-out of an alternative TNT’s profitability in Mail was sustained in 2007 through its
economy network and the launch of new Master Plans. Outside customer focus, its market segmentation and a set of cost
the Netherlands, platforms were established to become the restructuring measures that are being implemented with
number one challenger to incumbent European mail operators. great rigour in its home market, the Netherlands.
In the second phase of the Focus on Networks strategy, Mail
Netherlands will further focus on a detailed plan and execution The cost saving programme includes a restructuring of the
of Master Plans, alternative value drivers by strategic product marketing and sales channels and organisation, a restructuring
development and the implementation and evaluation of the new of TNT’s overhead, and a restructuring of its operations. Up
postal act. Outside the Netherlands, the focus will be on until 2006, TNT achieved aggregate cost savings under the
optimising and growth of market positions, growth in Master Plans announced in 2001 of €298 million.
profitability and look for expansion beyond the present scope.
In Parcels TNT will focus on broadening its product portfolio, In December 2006, TNT announced new cost saving initiatives
32
Growth through networks further developing the broker role, and looking for domestic to save €300 million on an annual basis. Together with the
Annual report 2007 opportunities on a per country basis. remaining savings out of the Master Plans 2001, TNT targets
to save €370 million between 2007 and 2015. In 2007, TNT
CHAPTER 4
The Mail Both in the Netherlands, where the challenge is to maintain the achieved €38 million in savings. At the end of 2007, a start of
division leading position, and in other countries, where TNT uses the efficiency projects was announced for which a €110 million
opportunities to become the main challenger of the incumbent provision was established. All savings initiated together with
postal operators, the digitisation and stepwise liberalisation new commercial initiatives will prepare the Dutch Mail activities
further for the changing market dynamics. TNT aims at limiting The earlier mentioned cost saving plans target the operational
the volume decrease in its position to 3% to 4% per annum. chain of collection, transport, sorting, preparation and delivery.
The plans also include steps towards a more market conform
Business performance outside the Netherlands in 2007 was wage structure and a renewed effort to optimise marketing
significantly influenced by successful strong revenue growth of and sales and overhead processes. In 2007, TNT discussed and
an emerging nature, particularly in European Mail Networks. refined these plans with employees, trade unions and works
However this growth, focused at building new positions, also councils, a process that is still continuing into 2008. TNT
requires significant start up costs particularly in Germany and expects the first savings from these new initiatives to materialise
the United Kingdom. A disappointment in this respect was the in 2008. In 2007, Master Plan savings were €38 million.
failed build-up of a parcel network in the United Kingdom, for
which TNT took a €28 million charge for an onerous contract, Included in Mail Netherlands are the pro rata consolidated
including an amount of €5 million for impairment of various revenues and results of TNT’s 50% interest in Postkantoren
assets. This came on top of the €20 million operating losses that B.V., a joint venture with Postbank N.V., a subsidiary of ING
negatively influenced 2007 operating result of the Mail activities. Group N.V. The core business of Postkantoren B.V. is the
The contract underlying the related UK parcel operations of distribution of financial and communication services and
TNT’s Mail division has been transferred to Parcelnet Ltd. products (including postal services) to consumers and small
businesses throughout the Netherlands.
Mail Netherlands
TNT’s Mail Netherlands business line collects, sorts, transports
Cross-border Mail /
and delivers postal items, including letters, addressed
advertising mail and magazines (‘direct mail’), printed matter,
Spring Global Mail
newspapers and parcels within the Netherlands. TNT’s Cross-border Mail business line offers a range of services
to individual and business customers. These services include
The main focus of Mail Netherlands is on maintaining the handling exported postal items in the Dutch market and all
position of market leader in a shrinking market that will possibly postal items imported to or passing through the Netherlands
be fully liberalised in 2008. TNT’s goal is to offer the best price/ from foreign public and private postal operators.
value proposition in the Dutch mail market, and as such to
optimise its long term EBIT and stabilise its cash flow. Cross-border Mail services also include handling bulk mailings
for a range of international customers, including publishers,
TNT’s commercial initiatives are connected to the change of mail-order companies, and financial services and direct mail
the communications patterns of its customers. Internet and companies. TNT conducts these activities through its 51%
new media are increasingly used, thus changing the character of owned subsidiary G3 Worldwide Mail N.V. (Spring Global Mail),
mail. However, the strength of direct mail as a communications co-owned with Royal Mail Investments Limited and Singapore
medium remains unchanged, in particular when sent to the right Post Limited. This company operates in three geographic
target group at the right moment. Technological developments regions: Europe, the Americas, and Asia Pacific and is based,
enable TNT to develop products that help its customers to use amongst others, in Amsterdam, Toronto and Singapore. In
the advantages of direct mail. Further, TNT has developed a addition to using its three shareholders’ delivery networks,
budget alternative for addressed delivery through its subsidiary systems, expertise and products, Spring Global Mail uses
‘Netwerk VSP’, that is offering a lower service level (once a delivery agreements with national and private postal operators.
week delivery) for lower prices.
Spring Global Mail’s name and credibility in the marketplace are
Outside the direct mail environment, TNT also turns the threat achieved by delivering service and local expertise through a
of technological developments into an opportunity through the global network. In addition to its cross-border business mail
development of innovative services. Together with Microsoft, services, Spring Global Mail also provides a number of value
TNT brings electronic invoicing to a higher level. With TNT added services with the objective of retaining and growing its
Billing Solutions TNT facilitates the billing processes between customer base. The trading environment for Spring Global Mail
companies. TNT works together with internet shops like continues to be a significant challenge and is heavily influenced
Marktplaats.nl, has launched a gift shop through its website, by the slow pace of liberalisation in the marketplace and, in
is part of the initiative Nationale Apotheek.nl and frequently some countries, a trend towards re-monopolisation. Cross-
updates its photo, postcard, personalised stamps and other border Mail saw its revenue declined by 1.3% in 2007.
services that are available through the TNT website. TNT
believes that it has to respond to these developments in
order to maintain its leading position to serve changing
European Mail Networks
customer needs. Through its European Mail Networks business line, TNT is
building a position to offer its customers a full service concept
Despite these initiatives, competitive pressure will persist in for mail, based upon high quality of service and wide coverage in
the coming period and substitution of mail will continue. addressed and unaddressed delivery. In addition, TNT offers a
However, if no new commercial initiatives had been developed, portfolio of mail-related services to reinforce its distribution
33
this could have resulted in volume declines of up to 40% by 2015 activities. TNT now has a presence in Austria, Belgium, the Growth through networks
compared to 2006. Czech Republic, Germany, Italy, the Netherlands, Slovakia and Annual report 2007
the United Kingdom.
CHAPTER 4
It is TNT’s ambition to limit volume decline over the period The Mail
2006-2015 to an average of between 3% and 4% per annum, In addressed delivery the main focus in 2007 continued to be on division
although in the first one or two years after full liberalisation strengthening TNT’s position in the key markets of Germany
TNT expects slightly higher declines. and the United Kingdom.
 In Germany, TNT strengthened its position with the further result and as previously mentioned, TNT decided to transfer
expansion of the regional distribution networks to 24.4% and exit the current parcel business in the United Kingdom.
coverage. The aim is to be active in all high density areas in
Germany and thus secure a nationwide product offering by In unaddressed delivery TNT strengthened its position in 2007
TNT’s 71% subsidiary TNT Post AG & Co. KG. This subsidiary in all markets where TNT is present, mainly through organic
successfully gained new customers in 2007. Through growth. In the Netherlands, Belgium, Italy, and Central and
partnerships with regional distribution companies of which Eastern Europe, TNT is a significant player. In almost all
TNT Post Regioservice is one, TNT furthermore achieved a countries, however, TNT is experiencing intense price
national coverage for the distribution of letter mail of more competition (mostly by companies owned by other postal
than 90% of all households in Germany. TNT’s PostCon operators who use their dominant position and wish to enter
Deutschland AG, the market leader in consolidation in this market). In all countries TNT has been successful in
Germany, was able to grow its customer base further. retaining its market share by retaining customers and volumes.
TNT continuously invests in quality of services to differentiate
On 21 January 2008, two subsidiaries of TNT Post Germany itself from those competing on price. In 2007, EMN saw its
instituted preliminary legal proceedings with the Administrative revenue grow with 33.8% to €1,002 million and performed at
Court (Verwaltungsgericht) in Berlin to obtain an injunctive relief ROS of low single digit (excluding UK parcels).
(einstweiligen Anordnung) to suspend the generally binding
minimum wage in the postal services sector as adopted by
the Federal Ministry of Labour and Social Affairs on 28
Data and document
December 2007. TNT has taken the position that this
minimum wage is unconstitutional.
management / Cendris
After the disposal of the mailroom, repro and capture activities
TNT Post is supporting trade union efforts towards achieving a in November 2006, Cendris acquired the remaining 49% of
minimum wage that reflects the cost of living and the Cendris Customer Contact in March 2007. This enables
competitive position of companies in the national and Cendris to focus on a complete portfolio of direct
international markets. Since 1 January 2008, TNT Post has been communication, data and document management services.
subject to the collective labour agreement of the employers’ Cendris provides services on finding, retaining and developing
association for new postal and delivery services customers and offers services for call centre activities, printing
(Arbeitgeberverband Neue Brief- und Zustelldienste). of statements and direct mail. Cendris’ revenue in 2007
organically decreased by 0.5% to €154 million.
The contended regulation passed by the German Federal
Ministry of Labour and Social Affairs has set the minimum
wage negotiated between the trade union ver.di and the
employers’ association for postal services. The measure,
Financial results
which has made the minimum wage generally binding for all In 2007, TNT’s Mail business earned revenues of €4,234 million,
companies in the postal and delivery services sector, has a 4.2% increase compared to 2006. Mail accounted for 38.4% of
produced a conflict between two collective labour agreements. TNT’s group operating revenues and 52.5% of TNT’s group
In view of fair competition in the postal market, the generally operating income.
binding validity of the minimum wage agreement of the
employers’ association for postal services is unacceptable to In 2007, approximately 23.5% of TNT’s Mail operating
TNT Post since it would seriously jeopardise the liberalisation revenues and approximately 9.0% of the group’s operating
of the German mail market and TNT’s ability to build a revenues (2006: 24.6% and 9.9%) were derived from reserved
sustainable profitable business. postal services in which TNT generally was not subject
to competition.
By instituting legal proceedings TNT aims to secure legal
certainty for its EMN German operations which employ in total In 2007, TNT experienced a volume decline of 4.4% compared
around 14,000 employees and earned €233 million of revenue to 2006. The underlying decline of volumes adjusted for a
at an operating loss of €31 million in 2007. So far in total TNT comparable number of working days per year was 4.1%.
has invested around €80 million in Germany as part of its The total TNT Mail Netherlands addressed mail volumes
strategy to become the number one challenger to incumbent have decreased an average 2.4% per annum since 2000. This
European mail operators in selected countries. is within the guidance TNT gave in 2001 and the indicated
average decline between 2% and 3% up to 2010. In 2004, TNT
In the United Kingdom, TNT has contracted with Royal Mail for updated this guidance with an average volume decline between
downstream access which allows TNT to offer customers an 3% and 4% annually from 2004 up to 2012 onwards. The average
alternative in the postal market. In 2007, TNT again gained decline since 2004 was around 3.9% per annum. The decline
many important contracts and strengthened its position was due in part to substitution by electronic media and
further. At the same time TNT opened four regional offices accelerated by competition.
with sorting facilities targeting the small and medium
enterprises market that will allow TNT to offer customers a
34
Growth through networks broader portfolio of services and, ultimately, an end-to-end
Annual report 2007 solution. A significant business has been built up and market
leadership in the access market is realised.
CHAPTER 4
The Mail
division Last year, TNT launched the build-up of a parcels network in
the United Kingdom. During 2007, it appeared that the business
was performing considerably less promising than expected. As a
The following tables set out the financial performance of TNT’s
Mail division for the past two years:

Year ended at 31 December

Mail financial overview 2007 variance % 2006

Total operating revenues 4,234 4.2 4,065
as % of total operating revenues TNT 38.4 40.4

Other income 64 10.3 58

Total operating expenses (3,672) (9.2) (3,362)
Total operating income 626 (17.7) 761
as % of mail operating revenues 14.8 18.7%

(in millions, except percentages)

Year ended at 31 December

Mail operating revenues 2007 variance % 2006

Mail Netherlands 2,551 (1.7) 2,596
European Mail Networks 1,002 33.8 749
Cross-border Mail 527 (1.3) 534
Data and Document Management 154 (17.2) 186

Total operating revenues 4,234 4.2 4,065

as % of total operating revenues TNT 38.4 40.4

(in millions, except percentages)

Year ended at 31 December

Mail operating expenses 2007 variance % 2006

Cost of materials 156 (4.9) 164
Work contracted out and other external expenses 1,394 15.9 1,203
Salaries and social security contributions 1,614 2.9 1,569
Depreciation, amortisation and impairments 135 135
Other operating expenses 373 28.2 291

Total operating expenses 3,672 9.2 3,362

(in millions, except percentages)

Year ended at 31 December

Mail operating statistics 2007 2006 2005

Addressed postal items delivered by Mail Netherlands (millions) 1
4,701 4,918 5,139
per Netherlands delivery address (items) 608 644 679
per Mail Netherlands FTE 2 (thousands of items) 153 155 152
per Netherlands inhabitant (items) 287 301 315
per delivery day (millions) 15 16 17
35
total operating revenues per FTE 2 (thousands of €) 99 95 94 Growth through networks
Annual report 2007
average percentage of national mail sorted automatically (%) 84 83 84
Postal volumes by Cross-border (thousands of kilogrammes) 88,782 88,237 81,334 CHAPTER 4
The Mail
Addressed postal items delivered by EMN (millions) 1,621 894 490 division

1 – Excluding international mail items per delivery day (millions).

2 – The FTE (full-time employee equivalent) definition is based on a 37-hour work week.
 The operating revenues of the Mail business increased by 4.2% decrease was mainly attributable to the sale of Cendris
in 2007 (2006: 2.8%). In Mail Netherlands revenues declined by Document Management B.V. in 2006.
1.7% (2006: 1.9%). On a comparable number of working days’
basis, the addressed Mail Netherlands volume decline was 4.1% Other income increased to €64 million (2006: €58 million),
(2006: 4.0%). Revenues in European Mail Networks showed a mainly as a result of higher sales of real estate (€20 million),
33.8% growth. Revenues in TNT’s cross-border line of business partly offset by lower gains on disposed companies.
declined by 1.3%. Data and Document Management revenues
decreased by 17.2% of which 16.7% as result of net divesting.
Mail operating expenses
Operating expenses were growing by 9.2% to €3,672 million. TNT’s Mail business operating expenses increased by €310
The growth was due to EMN growth and a charge of €110 million (9.2%) in 2007 compared to 2006. The organic growth in
million for restructuring costs. operating expenses of TNT’s Mail division was €280 million
(8.3%). The acquisitions in 2007 and during 2006 had a positive
Mainly due to the above mentioned increase in operating effect of €36 million (1.1%) on operating revenues. Foreign
expenses, the operating income decreased by 17.7% in 2007. exchange effects counted for a decline of €6 million (-0.2%).

Mail operating revenues Costs for work contracted out increased by €191 million, which
is mainly attributable to the organic growth and acquisitions
In 2007, operating revenues from TNT’s Mail business increased realised in European Mail Networks. In 2007, costs of salaries
by €169 million (4.2%) compared to 2006. Organic operating increased by €45 million, mainly as a result of €110 million
revenues increased by €156 million (3.8%). Compared to last restructuring charges in Mail Netherlands for efficiency
year, 2007 showed a €19 million (0.5%) positive acquisition projects to standardise the collection, preparation and delivery
effect, due to a number of acquisitions realised in 2006 of mail. Higher costs of salaries due to organic growth and
(including PostCon Deutschland AG, CBS City Briefservice acquisitions by European Mail Networks were partly offset by
GmbH , MailXpress GmbH, Ridas Sicherheits- und a reduction of FTEs in Mail Netherlands in connection with
Handelsgesellschaft m.b.H, Germany, TWM Italia Srl. and the cost flexibility programme and lower pension costs
Turbopost GmbH, Giebiesse Italia Srl. and JD Williams) and compared to 2006.
disposals in 2006 (including Cendris Document Management
B.V., ID Company Fashion B.V., and TNT’s share in Mailprofs Other operating expenses increased by €82 million compared
Employment B.V.) and a number of acquisitions realised during to 2006, mainly due to the cost for downsizing and transferring
2007 (including Regio ES, Blitzkurier Wesel, City Mail, the onerous contract and related UK Parcel operations of Mail
Mailexpress Oldenburg, RSM Srl and remaining shares Cendris to Parcelnet Ltd. for a total amount of €23 million, This also
BSC Customer Contact B.V.) and disposals in 2007 (including caused the deprecation to increase with €5 million.
Spring USA and Cendris Customer Contact Deutschland
GmbH). Foreign exchange effects accounted for a decrease of
€6 million (0.1%).
Mail operating income
In 2007 the Mail business operating income decreased by
Mail Netherlands operating revenues in 2007 decreased by €45 €135 million (17.7%) compared to 2006, on balance due to
million (1.7%) compared to 2006. The organic volume decline in restructuring charges in Mail Netherlands and expansions in
addressed mail items was partly offset by a positive price-mix European Mail Networks.
effect and other effects. The continued underlying decline in
addressed postal item volumes in 2007 was primarily due to In 2007, overall operating income of TNT’s Mail division as
competition in the non-mandatory area, accompanied by a percentage of its operating revenues decreased to 14.8%
reduced demand for direct mail as a result of cost saving or 17.4% if adjusted for €110 million restructuring provision
programmes initiated by some of TNT’s key customers due to compared to 18.7% in 2006.
the continued substitution by electronic media.

European Mail Networks operating revenues increased by

33.8% in 2007. The organic growth in operating revenues of
TNT’s EMN business was €189 million (25.2%). The acquisitions
in 2007 and during 2006 had a positive effect of €67 million
(8.9%) on operating revenues. Main contributors to this growth
were the United Kingdom and Germany. The United Kingdom,
Germany, Italy, and the Netherlands showed double digit
growth. Foreign exchange effects had a negative effect of
€3 million (-0.4%).

In Cross-border Mail competition remained fierce, with the key

international postal operators continuing to compete on price.
36
Growth through networks Cross-border Mail operating revenues in 2007 increased
Annual report 2007 organically by €17 million (3.2%) compared to 2006. The main
driving factors for this increase were growth in TNT’s domestic
CHAPTER 4
The Mail export and parcels.
division
In a competitive market, Data and Document Management
operating revenues decreased by €32 million (17.2%). This
Mail capital expenditures and proceeds
Year ended at 31 December

Capital expenditures 2007 variance % 2006

Property, plant and equipment 73 (1.4) 74
Other intangible assets 26 (27.8) 36

cash out 99 (10.0) 110

Proceeds from sale of property, plant and equipment 64 8.5 59
Disposals of other intangible assets 0 0

cash in 64 8.5 59
Netted total 35 51
(in millions, except percentages)

Capital expenditure on property, plant and equipment and

other intangible assets by TNT’s Mail division totalled €99
million in 2007, which was a decrease of 10% compared to 2006.
The main capital expenditures in 2007 related to machinery and
equipment (€14 million), IT (€29 million) and housing (€18
million). The remaining €38 million of capital expenditure is
related to various smaller projects. For instance, significant
investments were made in sorting machines and sorting
software in Europe (€7 million).

37
Growth through networks
Annual report 2007

CHAPTER 4
The Mail
division
 the annual general meeting of shareholders on 11 April 2008.
The changes in positions were discussed as part of the policy on
succession of its members by the Supervisory Board.

report of the Composition committees

Supervisory
The following changes to the composition of the committees
took place in 2007: Ms. Harris and Ms. G. Kampouri Monnas
were appointed to the audit committee whereas Messrs.
Halberstadt and Levy resigned from this committee. Ms.

Board
Kampouri Monnas and Mr. Cochrane resigned from the
remuneration committee, while Mr. Stomberg took over
Mr. Cochrane’s position as chairman of this committee and
Messrs. Hommen and R. King were appointed to this
committee. The composition of the public affairs committee
2007 —
Annual report remained unchanged. Mr. Cochrane’s position as vice-chairman
of the Supervisory Board was not filled. For an overview of the
current composition of the committees, see chapter 6.

Induction
As a new member of the Supervisory Board, Ms. Harris
attended a full-day induction programme in May 2007. Senior
Composition corporate directors went through the strategic, financial, legal
and reporting affairs of TNT with Ms. Harris.
Supervisory Board
The composition of the Supervisory Board changed in 2007.
At the annual general meeting of shareholders held on 20 April
Meetings of the
2007, Mr. J.M.T. Cochrane announced his resignation as
vice-chairman and member of the Supervisory Board effective
Supervisory Board
31 July 2007. He had been a member of the Supervisory Board In 2007, the Supervisory Board held seven meetings, six of
since the demerger of TNT in 1998. The Supervisory Board is which with the Board of Management. The Supervisory Board
grateful for his advice, wisdom and dedication over those years. also held five evening meetings, of which three were attended
Ms. M. Harris, former partner of McKinsey & Company, was by the full Board of Management and two by the CEO only. Four
appointed as a new member of the Supervisory Board by the of the evening meetings were concluded with private sessions
annual general meeting of shareholders held on 20 April 2007. of the Supervisory Board with no members of the Board of
Management present. The chairman had frequent meetings
Messrs. R. Dahan and W. Kok were re-appointed by the annual with the CEO, and from time to time with other members
general meeting of shareholders on 20 April 2007 for additional of the Board of Management, in between the Supervisory
four year terms. Mr. V. Halberstadt was re-appointed for an Board meetings.
additional three year term.
The Supervisory Board held no meetings by telephone. Most
As of the close of the annual general meeting of shareholders meetings were attended by the full Supervisory Board. There
to be held on 11 April 2008, the term of Mr. R.J.N. Abrahamsen was no frequent absence of any of the members of the
will expire. Mr. Abrahamsen will be available for Supervisory Board.
re-appointment. Mr. J.H.M. Hommen has announced that he
will step down as chairman of the Supervisory Board as soon In February, the Supervisory Board approved the amendment
as a suitable replacement will be available. He will resign from of TNT’s articles of association involving the conversion of the
the Supervisory Board at the annual general meeting of special share held by TNT previously acquired from the State
shareholders in 2009, when his third term will expire. of the Netherlands. The Supervisory Board approved TNT’s
Mr. Hommen’s decision to step down as chairman is due to the 2006 financial statements and 2006 full year dividend. The
fact that as of 1 January 2008 the number of supervisory board management letter by TNT’s auditors,
positions he holds with Dutch listed companies exceeds the PricewaterhouseCoopers Accountants N.V., the TNT Reserves
number of five. Also Mr. R.W.H. Stomberg has announced he and Dividends Guidelines and the 2006 social responsibility
will step down as a member of the Supervisory Board and report were discussed. The cancellation of shares purchased
chairman of the remuneration committee at the annual general by TNT under the share buy-back programme announced on
38
Growth through networks meeting of shareholders on 11 April 2008, two years before his 26 February 2007 and the agenda for TNT’s annual general
Annual report 2007 third term will expire. Both Messrs. Hommen and Stomberg meeting of shareholders of 20 April 2007 were approved.
have been members of the Supervisory Board since 1998. Finally, the terms of reference of the public affairs committee
CHAPTER 5
Report of the ‑of the Supervisory Board were amended.
Supervisory Board Mr. Stomberg will be succeeded by Mr. S. Levy as chairman
of the remuneration committee. The Supervisory Board has In April, the remuneration of the Board of Management
started the search for two new members for appointment at was discussed.
In May, the Supervisory Board discussed the 2007 first quarter which strategy was launched in December 2005. The first
results. The Supervisory Board discussed and approved the phase of this strategy was well underway mid 2007. An
amended by-laws of the Supervisory Board and the Board of update was given on EMN and the integration of Express
Management. The terms of reference of the audit committee of acquisitions. Various growth initiatives were discussed as
the Supervisory Board were revised. The Supervisory Board well as finance strategy.
also reviewed and approved updated group policies on inside
information and auditor independence & pre-approval and With the start of the second phase of Focus on Networks in
discussed and approved the proposed delisting from the New December 2007, the Supervisory Board and the Board of
York Stock Exchange and the related deregistration with the Management discussed the emphasis for the coming period
United States Securities and Exchange Commission. on further strengthening the Express emerging business and
integrating the acquired businesses in TNT’s Express networks.
In June, the Supervisory Board jointly with the Board of The Supervisory Board acknowledges this emphasis.
Management visited TNT’s newly acquired Chinese freight and In Mail the focus was on maintaining market share in the
parcels company Hoau. Netherlands home market and capturing growth opportunities
outside TNT’s home market. In 2007, TNT launched cost
In July, the Supervisory Board held the annual strategy meeting saving initiatives that are currently under negotiation with
together with the Board of Management, reviewing both the the trade unions.
business strategies of the Mail and Express divisions as well as
the group strategies, including the financial strategies.

At its regular meeting held in July, the 2007 second quarter

Meetings of the committees
results and the half-year management letter by
PricewaterhouseCoopers Accountants N.V. were discussed,
Audit committee
and the Supervisory Board approved the 2007 interim dividend. In 2007, the audit committee met five times. All meetings were
The Supervisory Board also discussed the progress on the attended by the CEO (except in December), CFO, internal
roll-out of the integrity programme. The Supervisory Board auditor and external auditor. On a quarterly basis, the audit
approved the financing strategy 2007/2008, including a share committee held individual private conversations with the CEO,
buy-back programme of up to €500 million. A first tranche of CFO, internal auditor and external auditor. The audit
up to €200 million and a second tranche of up to €100 million committee discussed the full year 2006 and half-yearly 2007
have been completed to date is currently in progress. The management letters as well as TNT’s 2006 annual results and
acquisitions completed in 2006 and early 2007 were followed the 2007 first quarter, half year and third quarter results with
closely by the Supervisory Board in 2007. Attention was also TNT’s external auditor PricewaterhouseCoopers Accountants
devoted to the prevention of road and workplace accidents, N.V. It also reviewed press releases and analyst presentations
especially in India and in Brazil. related thereto and compliance with TNT’s Group Policy on
Auditor Independence & Pre-Approval. The reports of TNT’s
In October, the 2007 third quarter results were discussed. internal auditors were discussed on a regular basis. The audit
The Supervisory Board discussed new commercial and committee further reviewed the TNT Reserves and Dividend
cost-saving initiatives for the Dutch Mail operations in response Guidelines and proposals for the full year dividend 2006 and
to changing market dynamics from increased competition interim dividend 2007.
and substitution. Fatality reporting was discussed as well as
developments with respect to the postal activities in Germany. In February and July, the audit committee reviewed TNT’s
internal control mechanisms and risk management processes.
In December, the Supervisory Board discussed the 2008 Regular updates were given on integrity matters. The audit plan
preliminary budget plan with the Board of Management. 2007 was discussed with PricewaterhouseCoopers
The Supervisory Board also reviewed the company’s talent Accountants N.V. and the audit fee proposal for 2007 approved.
management and succession planning. The Supervisory Board Starting in February the Board of Management and the audit
discussed the risk management process including the material committee conducted their three yearly assessment of the
risks per division and for TNT as a whole. The progress with functioning of the external auditor PricewaterhouseCoopers
respect to the negotiations with the trade unions regarding new Accountants N.V. In December the audit committee reviewed
initiatives of the Master Plans, European Mail Networks the preliminary budget plan 2008 and internal audit plan 2008.
Germany, Parcels UK and fatality reporting were discussed.
In the December evening meeting, the Supervisory Board Due to the termination of TNT’s listing on the New York Stock
evaluated with the CEO the functioning of the Board of Exchange on 18 June 2007 and the termination of its reporting
Management and its individual members. Subsequently, the obligations with the United States Securities and Exchange
Supervisory Board discussed in a private session the functioning Commission as of 16 September 2007, the requirements of the
of the CEO and, based on an elaborate self-assessment, its own Sarbanes-Oxley Act were no longer applicable as of that date.
functioning, its profile, composition and competence and the The effects on internal control testing due to the delisting and
functioning of its committees. deregistration were discussed. It was agreed to maintain a high
standard of corporate governance, information and disclosure
39
after deregistration, in line with Dutch corporate governance Growth through networks
Strategy code and regulatory requirements. The SUN project,
which comprises key initiatives to optimise the fiscal, legal,
Annual report 2007

CHAPTER 5
In July, the Supervisory Board together with the Board of accounting and treasury structure of the organisation and its Report of the
Management discussed the 2007- 2012 strategy. TNT’s strategy subsidiaries, was discussed. The financing strategy 2007/2008, supervisory board
is to focus on providing delivery services by expertly managing including a share buy-back programme of up to €500 million,
delivery networks. TNT calls its strategy Focus on Networks, was also reviewed.
 During the year the audit committee discussed the progress
of the negotiations on the UK tax matter and the effect on
Independence of members
the estimated realistic range of contingent tax liabilities.
On 6 December 2007, the finalisation of all investigations
of the Supervisory Board
and the settlement of all UK tax matters was announced, Each Supervisory Board member’s year of birth, current and
with no additional liabilities beyond what was accrued for. former positions, and other supervisory board memberships
The contingent tax liability of “between €100 million and held are presented in chapter 6. Also listed are the date and
€250 million”, as disclosed in the annual report for 2006, term of first appointment, current term of office and
is no longer required. memberships of the Supervisory Board committees.

Remuneration committee The Supervisory Board confirms that all members of the
Supervisory Board are independent in the sense of best practice
In 2007, the remuneration committee held seven meetings. provision III.2.2 of the Dutch corporate governance code.
The remuneration committee is responsible for assessing and
preparing the remuneration policy applicable to the members
of the Board of Management. Early in the year, the
remuneration committee discussed the amendments to the
Diversity within the
remuneration policy for the Board of Management, which
amendments were adopted by the general meeting of
Supervisory Board
shareholders on 20 April 2007. In the second half of the year, In December 2007, the Dutch Corporate Governance Code
some minor amendments to the remuneration for 2008 Monitoring Committee (the Frijns Committee) issued its third
were discussed as well as the components of the remuneration advisory report with inter alia recommendations on diversity in
of the Board of Management which were checked against the composition of supervisory boards of companies listed on
market practice. Euronext Amsterdam. The Supervisory Board supports the
recommendations made by the Frijns Committee and will apply
See chapter 7 for further details on remuneration for the them wherever possible and feasible.
Supervisory Board and the Board of Management, including
a further explanation of the remuneration policy and actual TNT adheres to best practice III.1.3 of the Dutch corporate
remuneration and the relation between remuneration governance code, which states that information must be given
and performance of members of the Board of Management in the annual report on the members of the Supervisory Board
for 2007. themselves. Further to the recent recommendations of the
Frijns Committee, the Supervisory Board has explicitly included
Nominations committee in the information given on its members the number of women
in the Supervisory Board together with information on
The nominations committee held two meetings in 2007. In nationality, age, expertise and social background.
January, the composition of the Supervisory Board and
committees was reviewed. In December, the vacancies in the The Supervisory Board consists of ten members. Of these ten
Supervisory Board as of 11 April 2008 were discussed as well members, two are women (20%). With respect to nationality,
as the rotation plan of the Supervisory Board. The composition half of the board members are non-Dutch. In this group five
and succession planning of the Board of Management were different nationalities are represented. The average age is 63,
also discussed. the difference in age ranges between 41 and 70.

Public affairs committee All members have a university degree or the equivalent thereof.
The field of expertise ranges from (public) finance (professor)
The public affairs committee met five times in 2007. The to members who are experienced in consultancy and marketing
committee discussed national postal regulatory developments, to members who have operational experience, both in the
including the proposed new Dutch postal law and the status United States, in the Far East as well as in Europe.
and various related subjects of the liberalisation of the
European postal market. The public affairs committee reviewed The profile of the Supervisory Board is such that each member
TNT’s 2006 social responsibility report and the work plan for shall be capable of assessing the broad outline of the overall
the 2007 social responsibility report. Throughout 2007, the policy and shall have the specific expertise required for the
committee reviewed and discussed the new commercial and fulfilment of the duties assigned to the role designated to him
cost-saving initiatives for the Dutch mail operations, fatality or her within the framework of the profile. Each member shall
reporting and the Planet Me initiatives. The negotiations with have sufficient time available for the proper performance of
the labour unions on the new collective labour agreement and his or her duties. Each member shall have an international
the new initiatives on the Master Plans were discussed as well background whereby various nationalities shall be represented.
as the mobility collective labour agreement. Re-appointment is not automatic, but depends on the
performance in question. The Supervisory Board shall consist
40 Reporting by committees of a mix of persons with executive experience, preferably
gained in the private sector, in the corporate governance of
Growth through networks
Annual report 2007 Each committee reported its findings and conclusions on a large listed companies and experience in the political and
regular basis, both verbally and in writing, to the full social environment in which such companies operate. The
CHAPTER 5
Report of the Supervisory Board. Minutes of the audit committee meetings Supervisory Board has ensured the composition of its board
supervisory board were prepared over-night, being available in draft to the full to fit the profile and thus to be as independent and diverse as
Supervisory Board the next morning prior to the regular possible. The Supervisory Board feels the quality of its
Supervisory Board meeting. functioning has greatly benefitted from this approach.
Compliance
The Supervisory Board confirms that in 2007 no decisions
were taken by the Supervisory Board that did not comply
with its by-laws.

Financial statements
This annual report and the 2007 consolidated financial
statements, audited by PricewaterhouseCoopers Accountants
N.V., were presented to the Supervisory Board in the presence
of the Board of Management and the external auditor.
PricewaterhouseCoopers Accountants N.V.’s report can
be found on page 125.

The Supervisory Board recommends that the general meeting

of shareholders adopts the 2007 consolidated financial
statements of TNT. The annual general meeting of shareholders
will be asked to release the members of the Board of
Management from liability for the exercise of the management
of TNT’s affairs and management. The appropriation of profit
approved by the Supervisory Board can be found on page 126.

Subject to adoption of the financial statements, a final dividend

of €0.55 per ordinary share of €0.48 nominal value will be
paid in respect of the 2007 financial year. An interim dividend
of €0.30 has already been paid in 2007, so the total dividend
per ordinary share in respect of 2007 will be €0.85.

The Supervisory Board wishes to thank the Board of

Management and all employees of TNT for their outstanding
contributions in 2007.

Supervisory Board —
Amsterdam, 18 February 2008

41
Growth through networks
Annual report 2007

CHAPTER 5
Report of the
supervisory board
 Duties Board of Management
In performing its duties, the Board of Management acts in

corporate
accordance with the interests of TNT and the business
connected with it and, to that end, is required to consider all
appropriate interests associated with the company. The Board
of Management is firmly committed to managing the company in

governance
a structured and transparent fashion. TNT’s aim is to provide
stakeholders with a clear view on corporate decisions and
decision-making processes. TNT has a divisional structure
across countries and regions. Value-based management
provides TNT with an additional framework for forward-
2007 —
Annual report looking management of the company based on objective
criteria. Day-to-day decisions in the divisions are decentralised
within established standards, processes, requirements and
guidelines, with management items at divisional, BU and unit
level, securing optimal cross functionality.

TNT’s Board of Management is responsible for complying

with all relevant legislation and regulations, for managing the
risks associated with TNT’s activities, for its financing and for
its external communication. TNT’s Board of Management is
required to report developments on the abovementioned
subjects to, and discusses the internal risk management
and control systems with, TNT’s Supervisory Board and its
General audit committee.

Pursuant to the Enabling Act as currently in force, TNT is TNT’s Board of Management has formed two committees
subject to the full Dutch large company regime. Under these to aid compliance with applicable corporate governance
rules, TNT is required to adopt a two-tier system of corporate requirements: the disclosure committee and the
governance, comprising a board of management and an ethics committee.
independent supervisory board.
The disclosure committee advises and assists TNT’s Board of
In the two-tier corporate structure, the executive management Management to ensure that TNT’s disclosures in all reports are
is entrusted to the board of management under the supervision full, fair, accurate, timely and understandable and that they fairly
of an independent supervisory board. Both the supervisory present the condition of the company in all material respects.
board and the board of management are accountable to the
general meeting of shareholders for the performance of The ethics committee is appointed by the Board of Management
their duties. to advise and assist in developing and implementing group
policies and procedures aimed at enhancing integrity and ethical
Under the full large company regime, members of the board of behaviour and preventing fraud throughout TNT worldwide
management are appointed and can be suspended or dismissed and monitoring compliance thereof. The ethics committee
by the supervisory board. The decision of the supervisory oversees and coordinates investigations resulting from
board to dismiss a member of the board of management can complaints via the Whistleblower Procedure and/or the Fraud
only be taken after the general meeting of shareholders has Prevention Procedure, and it advises and makes
been consulted on the intended dismissal. Further, under these recommendations with regard to guidelines for disciplinary
rules certain resolutions of the board of management require actions. The ethics committee also advises and makes
the prior approval of the supervisory board. recommendations to the Board of Management and
line-management on the mitigation of fraud risk and on ethical
and anti-corruption matters. The ethics committee reports
Board of Management regularly to the Board of Management and on a half-yearly basis
to the Supervisory Board.
The Board of Management is responsible for TNT’s mission,
vision and strategy, its implementation as well as its over The by-laws of the Board of Management and the terms of
all results. At present, the Board of Management consists reference of both the disclosure committee and the ethics
of four members: the CEO, the CFO and two group committee can be viewed on TNT’s corporate website.
managing directors.
The Board of Management provides the Supervisory Board with
The group managing directors of each of TNT’s divisions are the information necessary for the proper performance of its
42
Growth through networks responsible for the development and execution of the business duties in a timely manner. In addition, the Board of Management
Annual report 2007 strategy and operations of the division within the framework is required to provide the necessary means, allowing the
set by TNT’s corporate strategy. Supervisory Board and its individual members to obtain
CHAPTER 6
Corporate all information which is necessary for them to be able to
governance TNT’s reporting structure is in line with the management function as a supervisory body of TNT. In its communication
structure of the two divisions, and its corporate legal structure with the Supervisory Board the Board of Management seeks
has largely been brought in line with its reporting structure. full transparency.
Members of the Mr. Koorstra is chairman of the supervisory board of Hermans
Investments B.V. and a member of the supervisory board
Board of Management of Royal Swets and Zeitlinger Holding N.V. He is also member
of the executive committee and general board of the
Confederation of Netherlands Industry and Employers
M.P. (Peter) Bakker (1961) (VNO-NCW) and a member of the advisory board of
— Chief Executive Officer Boer & Croon.
Peter Bakker has been CEO since 1 November 2001. He joined
Royal TNT Post (then called PTT Post) in 1991 and was M.C. (Marie-Christine) Lombard (1958)
appointed financial director of its parcels business unit in 1993. — Group Managing Director Express
He was appointed financial control director of TNT Post in Marie-Christine Lombard has been Group Managing Director
1996 and became a member of the board of management of Express and a member of the Board of Management since
TNT Post in 1997. Since the demerger of TNT N.V. (then 1 January 2004. She joined Jet Services in France in 1993. Upon
called TPG) from Koninklijke PTT Nederland N.V. until his TNT’s acquisition of Jet Services in 1999, Ms. Lombard joined
appointment as CEO, he was chief financial officer and a TNT (then called TPG) as the managing director of the
member of TNT’s Board of Management. Before joining domestic Express business and from March 2001 until 1 January
TNT Post, Mr. Bakker worked for TS Seeds Holdings. 2004 she was managing director of TNT’s international Express
business in France. Ms. Lombard is due for re-appointment as
His portfolio includes corporate strategy, communication, member of the Board of Management by the Supervisory Board
general counsel, corporate social responsibility, human in 2008 for another four year term.
resources and internal audit. Mr. Bakker is due for
re-appointment as member of the Board of Management and Ms. Lombard is a member of the supervisory board of Royal
chairman of the Board of Management by the Supervisory Wessanen N.V.
Board in 2008 for another four year term.
The members of the Board of Management have no relevant
Mr. Bakker is a member of the advisory board of World Press outside board positions other than those reflected above.
Photo and a member of the board of Foundation Moving the
World. Further, he is a member of the AFM Capital Markets
Committee and the chairman of the Dutch Committee on
Labour Market Participation. Mr. Bakker was a member
Supervisory Board
of the recently discontinued advisory board of ABN AMRO The Supervisory Board is charged with supervising the
Bank N.V. policies of the Board of Management and the general course of
affairs of the company and the business connected with it, as
C.H. (Henk) van Dalen (1952) well as assisting the Board of Management by providing advice.
— Chief Financial Officer The Supervisory Board evaluates the main organisational
Henk van Dalen has been CFO since 1 April 2006 and a structure and the control mechanisms established under the
member of the Board of Management since 20 April 2006. He management of the Board of Management. The responsibility
started his career at DSM N.V. in 1976 where he held various for proper performance of its duties is vested in the
human resource and general management positions at DSM Supervisory Board as a whole. Members of the Supervisory
Agro, DSM Research and DSM Polyethylenes. From 2000 until Board may take positions different from those of the
March 2006 Mr. Van Dalen was a member of the board of Board of Management.
management and CFO of DSM N.V.
In performing its duties the Supervisory Board is charged with
His portfolio includes financial reporting and accounting, risk acting in accordance with the interests of TNT and its affiliated
management and internal control, mergers and acquisitions, businesses. It shall take into account the relevant interest of the
business control, treasury, tax, investor relations, legal company’s stakeholders, and, to that end, consider all
and integrity. appropriate interests associated with the company. Members of
the Supervisory Board perform their duties without mandate
Mr. Van Dalen is a member of the supervisory board of and independent of any particular interest in the business of the
Macintosh Retail Group N.V. and NIBC Bank N.V. Furthermore, company. TNT’s Supervisory Board is responsible for the
he is a board member of the “Nationaal Fonds 4 en 5 mei” and a quality of its own performance and for this purpose annually
member of the board of advisors of AIESEC Nederland, Arthur reviews its performance.
D. Little Netherlands and NEVIR (Nederlandse Vereniging voor
Investor Relations). He also is treasurer of the Netherlands Share ownership is not required to qualify as a member of the
Olympic Committee (NOC*NSF). Supervisory Board. Under the large company regime members
of the Supervisory Board are appointed by the general meeting
H.M. (Harry) Koorstra (1951) of shareholders following nomination by the Supervisory Board.
— Group Managing Director Mail The general meeting of shareholders can, furthermore, dismiss
Harry Koorstra has been Group Managing Director Mail and the Supervisory Board as a whole by an absolute majority of the
43
a member of the Board of Management since 1 July 2000. votes cast representing at least one third of the issued capital. Growth through networks
He joined TNT Post (then called PTT Post) in 1991 as managing For further details on the appointment and dismissal of Annual report 2007
director of its then Media Service business unit and became a (members of) the Supervisory Board see articles 28 and 29 of
CHAPTER 6
member of its Board of Management in 1997. Before joining TNT’s articles of association. Corporate
the company, Mr. Koorstra worked for 15 years at VNU N.V., governance
most recently as general director of its Admedia/VNU TNT’s articles of association and the by-laws of the Supervisory
Magazine Group. Board can be viewed on TNT’s corporate website.
 Members of the Supervisory Board international advisory board and member of the supervisory
board of Royal KPN N.V.

J.H.M. (Jan) Hommen (1943) M. (Mary) Harris (1966)

Mr. Hommen has been chairman of the Supervisory Board since Ms. Harris was appointed as a member of the Supervisory
April 2005. He was appointed as a member of the Supervisory Board on 20 April 2007. Her current term expires in 2011. From
Board on 28 June 1998. His current term as member of the 1994 to 2006, Ms. Harris held a number of positions at
Supervisory Board expires in 2009. Mr. Hommen will not be McKinsey & Company in London, China, South-east Asia and
available for re-appointment. He is chairman of the supervisory Amsterdam. Perviously, Ms. Harris held positions at media
boards of ING Group N.V., Reed Elsevier N.V. and the venture capital firm Maxwell Entertainment Group, Pepsi Cola
Academic Hospital of Maastricht. He is a member of the Beverages, and Goldman Sachs & Co. Ms. Harris is a
supervisory board of Campina B.V. and chairman of the board non-executive director at J. Sainsbury plc.
of directors of TiasNimbas Business School of Tilburg
University. Mr. Hommen was formerly vice-chairman of the G. (Giovanna) Kampouri Monnas (1955)
board of management and chief financial officer of Royal Philips Ms. Kampouri Monnas was appointed as a member of the
Electronics N.V. and executive vice-president and chief financial Supervisory Board on 7 April 2005. Her current term expires in
officer of the Aluminium Company of America (Alcoa). Until 3 2009. Ms. Kampouri Monnas is a member of the supervisory
May 2007 Mr. Hommen was a member of the supervisory board board of Randstad Holding N.V. and member of the board of
of Royal Ahold N.V. Mr. Hommen was appointed to act as directors of Puig SL. Formerly, she was president of the
chairman of the supervisory board of ING Group N.V. on 1 international division and member of the executive committee
January 2008. As of 1 January 2008 Mr. Hommen has more than of Johann Benckiser GmbH and held various positions at
five board memberships. See also under Dutch corporate Procter & Gamble in Greece and the United States. Prior to
governance code in this chapter 6. This was approved by the this, Ms. Kampouri Monnas was urban development consultant
Supervisory Board in view of the fact that Mr. Hommen is for the Greek Ministry of Economic Affairs.
planning to step down as chairman of the Supervisory Board as
soon as a suitable replacement for his position as chairman will R. (Roger) King (1940)
be available. He will resign from the Supervisory Board at the Mr. King was appointed as a member of the Supervisory Board
annual general meeting of shareholders in 2009, when his third on 20 April 2006. His current term expires in 2010. Mr. King is
term will expire. non-executive director of Arrow Electronics, Inc. (USA) and
Orient Overseas International Limited (Hong Kong). He is a
R.J.N. (Robert) Abrahamsen (1938) standing committee member of the Chinese People’s
Mr. Abrahamsen was appointed as a member of the Supervisory Consultative Conference of Zhijiang Provincial Committee and
Board on 9 May 2000. His current term expires in 2008. Mr. serves on various business and community committees. Mr.
Abrahamsen will be available for re-appointment. Mr. King is Adjunct Professor at Hong Kong University of Science
Abrahamsen is chairman of the supervisory boards of Optimix and Technology. He is former president and chief executive
Vermogensbeheer N.V. and Trans Link Systems. officer of Sa Sa International Holdings Limited, former chairman
Mr. Abrahamsen is a member of the supervisory boards of Fluor and chief executive officer of ODS System-Pro Holdings
Daniel B.V., PON Holdings B.V., Havenbedrijf Rotterdam B.V., Limited (Hong Kong), part of the CY Tung Group of
ANP, Madurodam B.V., Royal BAM Group, Vitens N.V. and Bank Companies, and was managing director and chief operating
Nederlandse Gemeenten. He is a former member of the officer of Orient Overseas International Limited.
management board and chief financial officer of KLM Royal
Dutch Airlines N.V. and senior executive vice-president of ABN W. (Wim) Kok (1938)
AMRO Bank N.V. Mr. Kok was appointed as a member of the Supervisory Board
on 1 April 2003. His current term expires in 2011. Mr. Kok is a
R. (René) Dahan (1941) non-executive director of Royal Dutch Shell plc and member of
Mr. Dahan was appointed as a member of the Supervisory the supervisory boards of ING Group N.V. and KLM Royal
Board on 1 April 2003. His current term expires in 2011. Dutch Airlines N.V. Mr. Kok was formerly Prime Minister of the
Mr. Dahan is chairman of the supervisory board of Royal Ahold Netherlands, Minister of Finance, member of parliament, and
N.V., a member of the supervisory board of AEGON N.V., a chairman of the Confederation of Dutch Trade Unions and the
member of the international advisory board of the Instituto de European Trade Union Confederation.
Empresa Business School in Madrid and a member of the
advisory board of the Guggenheim Group in New York. He was S. (Shemaya) Levy (1947)
formerly executive vice-president and director of Exxon Mobil Mr. Levy was appointed as a member of the Supervisory Board
Corporation and held various positions with its subsidiaries. on 7 April 2005. His current term expires in 2009. Mr. Levy is a
member of the supervisory boards of Nissan, Renault Spain,
V. (Victor) Halberstadt (1939) Safran, Segula Technologies and AEGON N.V. Formerly,
Mr. Halberstadt was appointed as a member of the Supervisory Mr. Levy was chief executive officer of Renault Trucks and,
Board on 28 June 1998. His current term expires in 2010. Mr. subsequently, executive vice-president and chief financial officer
Halberstadt is professor of public finance at Leiden University, of Renault Group.
44
Growth through networks international advisor of Goldman Sachs Group Inc.,
Annual report 2007 non-executive director of PA Holdings Ltd. and a non-executive R.W.H. (Rolf) Stomberg (1940)
director of RHJ International. Furthermore, he is a member of Mr. Stomberg was appointed as a member of the Supervisory
CHAPTER 6
Corporate the supervisory board of Concertgebouw N.V. Mr. Halberstadt Board on 28 June 1998. His current term expires in 2010.
governance previously served amongst others as president of the Mr. Stomberg will step down in 2008 and will not be available
International Institute of Public Finance, Crown-member of the for re-appointment. Mr. Stomberg is chairman of Management
Social and Economic Council, chairman of the Daimler Chrysler Consulting Group plc and a non-executive director of
Smith & Nephew plc, Reed Elsevier N.V., Reed Elsevier plc and to the advice and services of the corporate secretary, who is
Severstal. Mr. Stomberg is also chairman of the supervisory responsible for ensuring that Supervisory Board procedures are
boards of Lanxess AG and Francotyp-Postalia AG, a member of followed and that the Supervisory Board acts in accordance
the supervisory boards of Deutsche BP AG and Biesterfeld AG with its statutory obligations under the articles of association.
and chairman of the advisory board of Hoyer GmbH. Mr. The corporate secretary is appointed and dismissed by the
Stomberg was formerly a managing director of British Board of Management, after the approval of the Supervisory
Petroleum Company plc, chairman of John Mowlem & Co. plc Board has been obtained. The corporate secretary is assisted
and chairman of Unipoly S.A, non-executive director of by a deputy corporate secretary.
Cordiant Communications Group plc and member of the
supervisory board of Scania AG. At TNT, the corporate secretary has been appointed as
secretary to the Board of Management and the Supervisory
Expertise and composition Board and as compliance officer for the purpose of the TNT
Group Policy on Inside Information.
of the Supervisory Board
The Supervisory Board consists of a minimum of seven and a
Committees of the
maximum of twelve members. The Supervisory Board
determines the number of members. At present, TNT’s
Supervisory Board
Supervisory Board has ten members. TNT’s Supervisory Board has formed an audit committee, a
remuneration committee, a nominations committee and a
The Supervisory Board has prepared a profile of its size and public affairs committee from among its members. The
composition, taking account of the nature of TNT’s business committees operate pursuant to terms of reference established
and activities and the desired expertise and background of the by the Supervisory Board according to the rules and regulations
members of the Supervisory Board. The Supervisory Board of the Dutch corporate governance code. The terms of
evaluates the profile annually and discusses the profile with the reference of these committees can be viewed on TNT’s
general meeting of shareholders and TNT’s central works corporate website.
council when any amendments to the profile are made.
Audit committee
According to the by-laws and the profile of the Supervisory The audit committee is charged with assisting the Supervisory
Board, a person may be appointed to the Supervisory Board for Board in advising on and monitoring, inter alia, the integrity of
a maximum of three terms of four years. TNT’s articles of TNT’s financial statements, system of internal business control
association also provide that members of the Supervisory and risk management, financing and finance related strategies
Board shall retire periodically in accordance with a rotation plan and tax planning. The audit committee has the authority to
drawn up by the Supervisory Board in order to avoid, as far as retain independent advisors as it deems appropriate, and
possible, a situation in which appointments and/or the company provides funding for advisors engaged by the
re-appointments occur simultaneously. Both profile and audit committee.
rotation plan can be viewed on TNT’s corporate website.
The audit committee consists of at least three members. All
In accordance with the Dutch corporate governance code, it is members of the audit committee must be members of the
the intention of the Supervisory Board that its members will Supervisory Board who are determined by the Supervisory
not hold more than five memberships in supervisory boards of Board to be independent within the meaning of its by-laws and
Dutch listed companies (including TNT). In this respect, a the applicable corporate governance rules. A member of the
chairmanship counts twice. audit committee may not simultaneously serve on the audit
committees of more than two other companies unless
There is an agreed procedure for members of the Supervisory the Supervisory Board determines that this simultaneous
Board to obtain independent professional advice at TNT’s service would not impair the ability of such member to serve
expense, if so required. effectively on the audit committee. The audit committee
and the remuneration committee may not consist of the
For a description of TNT’s Supervisory Board’s activities in same members.
2007, see the report of the Supervisory Board in chapter 5.
Each member of the audit committee must be financially literate
Chairman and corporate secretary and at least one member of the audit committee must have
accounting or related financial management expertise.
The chairman of TNT’s Supervisory Board determines the
agenda and presides over meetings of the Supervisory Board. Remuneration committee
The chairman is responsible for the proper functioning of TNT’s The remuneration committee is appointed by the Supervisory
Supervisory Board and its committees. Furthermore, the Board to propose the remuneration of the individual members
chairman arranges for the induction and training programme for of the Board of Management for adoption by the Supervisory
the members of TNT’s Supervisory Board and initiates the Board. The remuneration committee also proposes a
45
evaluation of the performance of the members of the remuneration policy, including schemes under which rights on Growth through networks
Supervisory Board and the Board of Management. shares are granted, for members of the Board of Management Annual report 2007
and prepares a proposal for the remuneration of the individual
CHAPTER 6
The chairman of TNT’s Supervisory Board may not be a former members of the Supervisory Board, both for adoption by the Corporate
member of TNT’s Board of Management. general meeting of shareholders. Furthermore, the governance
remuneration committee discusses the allocation of rights
TNT’s Supervisory Board is assisted by TNT’s corporate to shares in the company’s capital to other senior management
secretary. All members of the Supervisory Board have access of the company.
 Nominations committee Public affairs committee
The nominations committee is appointed by the Supervisory The public affairs committee is appointed by the Supervisory
Board to draw up selection criteria and appointment Board to act as a sounding board and advisory committee for the
procedures for members of the Supervisory Board and Board of Management with respect to formulating, developing,
members of the Board of Management, to set up procedures monitoring and reporting on (i) TNT’s public affairs policy,
to secure adequate succession of members of the Board of governing the relationships between TNT and national and
Management and the assessment of such candidates, and to international (semi) public bodies, and (ii) TNT’s social and
make proposals for nominations, appointments and environmental policies.
reappointments. At least annually the size and composition
of the Supervisory Board and the Board of Management and
the functioning of the individual members is assessed by the
nominations committee.

Supervisory Board committees

Name Nationality Appointed Term expires Committee membership
J.H.M. Hommen Dutch June 1998 2009 Remunerations, Nominations (chair), Public Affairs
R.J.N. Abrahamsen Dutch May 2000 2008 Audit (chair), Nominations
R. Dahan Dutch April 2003 2011 Audit
V. Halberstadt Dutch June 1998 2010 Nominations, Public Affairs (chair)
M. Harris British April 2007 2011 Audit
G. Kampouri Monnas Greek April 2005 2009 Audit, Public Affairs
R. King American April 2006 2010 Remunerations
W. Kok Dutch April 2003 2011 Nominations, Public Affairs
S. Levy French April 2005 2009 Remunerations
R.W.H. Stomberg German June 1998 2010 Remunerations (chair)

Conflicts of interest another member of the Board of Management or a member of

the Supervisory Board appointed by the Supervisory Board for
of Board members this purpose.

The Supervisory Board is responsible for deciding how to A decision to enter into a transaction involving a conflict of
resolve conflicts of interest between members of the Board interest with a member of the Board of Management or a
of Management, members of the Supervisory Board and/or member of the Supervisory Board that is of material significance
the external auditor on the one hand and the company on to the company or to the relevant member requires the
the other hand. approval of the Supervisory Board. No such transactions were
entered into in 2007. Best practice provisions II.3.2 to II.3.4 and
A member of the Board of Management or of the Supervisory III.6.1 to III.6.3 inclusive of the Dutch corporate governance
Board is required to report immediately and provide all relevant code have been complied with.
information to the chairman of the Supervisory Board and to
the other members of the Board of Management (if it concerns The by-laws of the Board of Management and the Supervisory
a member of that board) on any conflict of interest or potential Board also include a provision that a member of the Board of
conflict of interest that may be of material significance to the Management or of the Supervisory Board shall not take part in
company and/or to the relevant member, including information any discussion or decision making that involves a subject or
concerning the relevant member’s spouse, registered partner transaction in relation to which such member has a conflict
or other life companion, foster child or relatives by blood or of interest with the company.
marriage up to the second degree. If the chairman of the
Supervisory Board has a conflict of interest or potential conflict
of interest that is of material significance to the company
and/or to him, he is required to report this immediately to the
Securities owned by
46
Growth through networks
Annual report 2007
vice-chairman of the Supervisory Board and provide all relevant
information, including information concerning his spouse,
Board members
registered partner or other life companion, foster child or The members of the Supervisory Board and Board of
CHAPTER 6
Corporate relatives by blood or marriage up to the second degree. Management and TNT’s other senior management are subject
governance to the TNT Group Policy on Inside Information, which contains
In the event of a conflict between TNT and a member of its rules of conduct to prevent trading in TNT’s financial
Board of Management, the company will be represented by instruments when holding inside information.
TNT’s Supervisory Board has adopted a policy concerning the interests do not dictate otherwise and that the request is
ownership of and transactions in securities other than TNT’s received by the Board of Management or the Supervisory
financial instruments by members of the Board of Management Board in writing, at least sixty days before the date of the
and the Supervisory Board. This policy is incorporated in the general meeting of shareholders.
by-laws of the Board of Management and the by-laws of the
Supervisory Board and requires that each member of the Board Notice to convene
of Management and Supervisory Board gives periodic notice, General meetings of shareholders are convened by at
at least quarterly, to TNT’s corporate secretary, acting as least 15 days’ prior notice published in a nationally
compliance officer, of any changes in his or her holding of distributed daily newspaper and in the Official Price List
securities in Dutch listed companies. A member of the Board of Euronext Amsterdam.
of Management or the Supervisory Board who invests
exclusively in listed investment funds or who has transferred
the discretionary management of his or her securities portfolio
Admission to and voting rights
to an independent third party by means of a written mandate
is exempted from compliance with these internal
at the meeting
notification requirements. Each shareholder has the right to attend general meetings of
shareholders, either in person or by written or electronic
The total number of ordinary shares held by members of proxy, to address the meeting and to exercise voting rights,
the Board of Management as of 18 February 2008 is 81,609, subject to the provisions of TNT’s articles of association.
amounting to approximately 0.022% of the outstanding An eligible shareholder has the aforementioned rights on the
share capital. applicable record date set by the Board of Management.

Each of the shares in TNT’s share capital carries the right to

Shareholders and their rights cast one vote. Unless otherwise required by Dutch law or
TNT’s articles of association, resolutions are passed by a
General meetings of shareholders simple majority of votes cast by the shareholders present or
represented at the meeting.

Frequency and venue Under TNT’s articles of association there are no limitations to
TNT is required to hold a general meeting of shareholders the rights of Dutch, non-resident or foreign shareholders to
within six months after the end of the financial year in order to, hold or exercise voting rights in respect of TNT’s securities,
among other things, adopt the financial statements and to and TNT is not aware of any such restrictions under Dutch
decide on any proposal concerning dividends. Further to Dutch corporate law.
law, the release from liability of the members of the Board of
Management and the Supervisory Board for the performance of
their respective duties during the financial year is also an item
Dividend rights
for the agenda of this meeting. However, this release only TNT pays dividends out of profits or by exception out of the
covers liability for matters reflected in the financial statements distributable part of its shareholders’ equity as shown in TNT’s
or otherwise disclosed to the general meeting of shareholders financial statements. TNT may not pay dividends if the payment
prior to the adoption of the financial statements. would reduce shareholders’ equity below the sum of the
paid-up capital and any reserves required by Dutch law or its
Other general meetings of shareholders are held as often articles of association. Subject to certain exceptions, if a loss is
as the Board of Management or the Supervisory Board sustained in any year, TNT may not pay dividends for that year
deem necessary and shall in principle be convened in the and TNT may not pay dividends in subsequent years until the
following circumstances: loss has been compensated for out of subsequent years’ profits.
——if shareholders jointly representing at least 10% of the
outstanding share capital make a written request to that Under TNT’s current articles of association, if preference
effect to the Supervisory Board and the Board of shares B have been issued, TNT has to pay dividends on the
Management, stating their proposed agenda in detail, or paid-up portion of the nominal value of the preference shares B.
——if the Board of Management proposes to take a decision that Payment is made at a rate of the average 12-monthly EURIBOR
will result in a significant change in the identity or character (EURO Interbank Offered Rate), weighted to reflect the
of TNT or its business. number of days for which the payment is made, plus a premium
to be determined by the Board of Management, subject to the
General meetings of shareholders may only be held in approval of the Supervisory Board, of at least one percentage
Amsterdam, The Hague, Hoofddorp or in the municipality point and at most three percentage points.
of Haarlemmermeer (Schiphol).
The Board of Management then determines, subject to the
Agenda approval of the Supervisory Board, which part of the remaining
One or more shareholders holding shares representing at least profits shall be appropriated to reserves. The profit that
47
1% of TNT’s issued share capital or representing a value of remains after appropriation is at the disposal of the general Growth through networks
€50 million according to the Official Price List of Euronext meeting of shareholders. Annual report 2007
Amsterdam has/have the right to request the Board of
CHAPTER 6
Management or the Supervisory Board to place items on The Board of Management may pass a resolution that has been Corporate
the agenda of the general meeting of shareholders. Such a approved by the Supervisory Board that any dividend on governance
request has to be honoured by the Board of Management or ordinary shares be paid wholly or partly in TNT’s ordinary
the Supervisory Board provided that important company shares rather than in cash.
 The Board of Management may, with the prior approval of the
Supervisory Board and subject to provisions of Dutch law,
Special share
distribute one or more interim dividends. From 29 September 2004 to 20 November 2006, the State of
the Netherlands reduced its holding in the outstanding share
No dividend shall be paid on shares held by TNT in its own capital of the company step by step from 34.8% to nil.
capital. Such shares shall not be included for the computation
of the profit distribution, unless the Board of Management Until 17 November 2006, the State of the Netherlands held the
resolves otherwise, which resolution is subject to the approval one special share in the company. It gave the State of the
of the Supervisory Board. Netherlands the right to approve decisions that would lead to
fundamental changes in TNT’s group structure. On 17
Any change to TNT’s guidelines on additions to reserves and on November 2006, the special share was transferred for free to
dividends (the level and purpose of the addition to reserves, the TNT. As per that date, the special control rights attached to
amount of the dividend and the type of dividend) shall be dealt this share reverted to the company. The company agreed not
with and explained as a separate agenda item at the annual to exercise the rights attached to the special share or sell the
general meeting of shareholders. The same rule applies to special share pending conversion of the special share into an
any resolution to determine and pay dividends. The TNT ordinary share. On 20 April 2007 the annual general meeting
Reserves and Dividend Guidelines can be viewed on TNT’s of shareholders resolved to convert the special share into an
corporate website. ordinary share as part of an amendment to the articles of
association. As a result, the special share ceased to exist on
Liquidation rights 27 April 2007.

In the event of TNT’s dissolution and liquidation, the assets

remaining after payment of all debts and liquidation expenses
Articles of association, share
are to be distributed in the following order of preference: first,
to the holders of all outstanding preference shares B (if any) the
acquisition, reduction and increase
nominal amount paid up on these shares plus accumulated
dividends for preceding years which have not yet been paid;
of issued share capital
and second, to holders of the ordinary shares in proportion
to their shareholdings. Amendments to the articles of association
Amendments to TNT’s articles of association can take place
Changes to the rights of shareholders on a proposal of the Board of Management approved by the
Supervisory Board and adopted by the general meeting of
Rights of shareholders may change pursuant to an amendment shareholders. A proposal to amend the articles of association
of the articles of association, a statutory merger or demerger must be stated in a notice convening a general meeting of
within the meaning of book 2 of the Dutch Civil Code or shareholders or announced subsequently by publication in a
dissolution of the company. A resolution of the general meeting nationally distributed daily newspaper and in the Official Price
of shareholders is required to effect these changes. Under List of Euronext Amsterdam, or in such manner as shall be
TNT’s articles of association, such resolution may only be permitted by law at any time. The proposal shall be passed upon
adopted upon a proposal of the Board of Management that an absolute majority of the votes cast in the general meeting
has been approved by the Supervisory Board. of shareholders.

Ability of the company to acquire its own shares

Major shareholders In order to execute share buy-back programmes as described in
To TNT’s knowledge TNT is not directly or indirectly owned chapter 9, TNT must be allowed to acquire its own shares.
or controlled by another corporation or by any government. Under Dutch law and its articles of association, TNT may
Except as described under “Foundation Protection TNT and acquire its own shares, provided that they are fully paid-up. If
preference shares B” below, TNT does not know of any such shares are acquired for consideration, the following
arrangements the operation of which might, at a subsequent conditions apply:
date, result in a change in its control.
——TNT’s shareholders’ equity less the purchase price may not
On 26 July 2007, TNT received notification from the fall below the sum of the paid­-up capital and any reserves
Netherlands Authority for the Financial Markets (AFM) that required to be maintained by Dutch law or pursuant to the
it had received disclosures of a substantial holding in the articles of association, and
company by Morgan Stanley & Co International Plc. under the ——following the share acquisition, TNT may not hold shares
Netherlands Financial Markets Supervision Act (Wet op het with an aggregate nominal value exceeding one-tenth of its
financieel toezicht). This substantial holding in the company was issued share capital.
subsequently step by step reduced to below 5% as of 9 August
2007. More information can be found on the website of the The acquisition of shares in its capital may be effected by a
AFM under notifications substantial holdings. resolution of the Board of Management, which resolution is
48
Growth through networks subject to the approval of the Supervisory Board.
Annual report 2007 The Financial Markets Supervision Act imposes a duty to
disclose percentage holdings in the capital and/or voting rights In addition to the above, the Board of Management requires
CHAPTER 6
Corporate in the company when such holding reaches, exceeds or falls prior authorisation by the general meeting of shareholders to
governance below 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and acquire shares in the company for consideration. This
95%. Such disclosure must be made to the AFM without delay authorisation may be valid for a period of no more than 18
which then notifies the company. months from the date of the meeting and must specify:
——the number of shares that may be acquired, respect. Pursuant to TNT’s articles of association shareholders’
——the manner in which shares may be acquired, and pre-emptive rights may be restricted or excluded by a
——the price limits within which shares may be acquired. resolution of the Board of Management, provided and as long
as the Board of Management has been designated as the body
On 20 April 2007, the annual general meeting of shareholders competent to resolve to issue shares. Such resolution is subject
extended the then-current authority of the Board of to the approval of the Supervisory Board. Pursuant to TNT’s
Management for another period of eighteen months to end on articles of association the provisions with respect to the
20 October 2008. scope and duration of the authority to issue shares and grant
rights to subscribe for ordinary shares are also applicable to
Authorisation by the general meeting of shareholders is not the scope and duration of the authority to exclude or restrict
required if TNT’s own shares are acquired for the purpose of pre-emptive rights.
transferring those shares to TNT employees pursuant to any
arrangements applicable to such employees.

Reduction of issued share capital in general Auditor

Cancellation of shares following a repurchase is one of the ways TNT’s external auditor, PricewaterhouseCoopers Accountants
to reduce the issued share capital. TNT’s issued share capital N.V., is appointed by TNT’s general meeting of shareholders.
may also be reduced by way of a reduction of the nominal value TNT’s audit committee has the sole authority, subject to
of its shares by amendment of TNT’s articles of association. confirmation by the Supervisory Board, to recommend to the
The general meeting of shareholders is the body competent general meeting of shareholders the appointment or
to resolve to reduce TNT’s issued share capital. Pursuant to replacement of the external auditor. The audit committee is
TNT’s articles of association, such resolution may be taken only directly responsible for the compensation and oversight of the
upon a proposal of the Board of Management that has been work of the external auditor on behalf of the Supervisory Board
approved by the Supervisory Board. The latter requirement is (including resolution of disagreements between management
more stringent than is required by Dutch law. and the external auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or related work.
Increase of issued share capital by issuance of The audit committee is required to pre-approve all auditing and
shares/pre-emptive rights audit related services, and permitted non-audit services
TNT’s Board of Management has been designated as the body (including the fees and terms thereof) to be provided by the
competent to resolve to issue shares in TNT and to grant rights external auditor. The audit committee pre-approved all
to subscribe for ordinary shares, including options and services performed in 2007, except for some services in the
warrants. Pursuant to TNT’s current articles of association, aggregate amount of around 1% of the total amount paid to
such resolution is subject to the approval of the Supervisory the external auditor.
Board. The scope and duration of this authority of the Board
of Management is determined by the general meeting of Conflicts of interest and potential conflicts of interest between
shareholders. Under TNT’s articles of association the scope the external auditor and TNT are resolved in accordance with
relates at most to all shares in its authorised share capital that the terms of reference of the audit committee and in particular
have not been issued. The duration of the authority shall be for the annex thereto: the “TNT Group Policy on Auditor
a period of five years at most. Independence & Pre-Approval”, which can be viewed on TNT’s
corporate website.
On 20 April 2007, the annual general meeting of shareholders
extended the then-current authority of the Board of At times TNT uses its external auditor to provide services in
Management to issue ordinary shares for another period of cases where these services do not conflict with the external
eighteen months to end on 20 October 2008. Ordinary shares auditor’s independence. The TNT Group Policy on Auditor
up to a maximum of 10% of the issued share capital may be Independence & Pre-Approval governs how and when TNT may
issued by resolution of the Board of Management. An additional engage its external auditor.
10% of the issued share capital may be issued that way when a
share issue takes place in relation to a merger or acquisition. The audit committee grants year-long general pre-approval for
The authority of the Board of Management to issue preference certain routine services and specific pre-approval for additional
shares B was not extended and has meanwhile lapsed. services or budget allocations. Significant non-audit services
See also below under “Foundation Protection TNT and require a tender process, and certain services are prohibited
preference shares B”. outright. In its approval-granting process, the audit committee
considers the applicable regulations and stock exchange rules
Extension of the term of designation of the Board of and whether the external auditor is best suited to perform the
Management as the body competent to issue shares may also services effectively and efficiently. The audit committee also
be effected by amending TNT’s articles of association to that considers the ratio between the total amount of fees for audit
effect. If no extension is given, the issue of shares or granting of and audit related services and the total amount of fees for
rights to subscribe for ordinary shares requires a resolution of non-audit services. The audit committee requires a formal
the general meeting of shareholders. Such resolution may only written statement from the external auditor describing all
49
be taken upon a proposal of the Board of Management, which relationships between the external auditor and TNT. In Growth through networks
proposal requires approval of the Supervisory Board. principle, the lead (signing) partner and the concurring (review) Annual report 2007
partner of the external auditor are rotated after a maximum
CHAPTER 6
In principle, each holder of ordinary shares has a pre-emptive period of five years. Corporate
right to any issue of ordinary shares or the granting of rights to governance
subscribe for these shares. Holders of American Depositary The audit committee and the Board of Management are
Receipts do not qualify as holders of ordinary shares in this required once every three years to conduct a thorough
 assessment of the functioning of the external auditor within the specific. TNT discloses the nature of the performance
various entities and in the different capacities in which the targets but not the actual targets. TNT has opted to use
external auditor acts. The last assessment was held in 2007. The performance targets aligning the remuneration of the
main conclusions of this assessment were communicated to the Board of Management with the business performance.
2007 annual general meeting of shareholders. As a result the targets are so specific that they contain
competition-sensitive information. See chapter 7 under
TNT’s internal auditor function, corporate audit services, Remuneration in 2007.
operates under the responsibility of the Board of Management
and is subject to monitoring by the Supervisory Board, assisted In the chapter sections referred to above, TNT explains why
by the audit committee. The Board of Management is required it deviates from these best practice provisions and
to ensure that the external auditor and the audit committee are recommendations. Material future (corporate) developments
involved in drawing up the tasks of the internal audit function. might justify further deviances from the Dutch corporate
governance code at the moment of occurrence.
The independent external auditor is required to attend the
meetings of the Supervisory Board at which the financial Each substantial change in the corporate governance structure
statements and the audit report of the external auditor with of the company and in the compliance of the company with the
respect thereto are discussed. Dutch corporate governance code shall be submitted to the
general meeting of shareholders for discussion.
See note 21 to the consolidated financial statements for the fees
paid to PricewaterhouseCoopers Accountants N.V. and the The full text of the Dutch corporate governance code can be
distribution of the fees between audit related services and viewed on TNT’s corporate website, group.tnt.com. Since its
non-audit services. delisting from the New York Stock Exchange on 18 June 2007
and its deregistration with the United States Securities and
Exchange Commission effective 16 September 2007, TNT is no
Dutch corporate longer subject to the corporate governance rules of this
exchange nor to the provisions of the Sarbanes-Oxley Act.
governance code
TNT applies the principles and best practice provisions of the
Dutch corporate governance code, taking into account the
Foundation Protection TNT
recommendations of the Frijns Committee, except for the
following best practice provisions and recommendations below
and preference shares B
that are not fully applied: Stichting Bescherming TNT (Foundation Protection TNT or
the Foundation) was formed to care for TNT’s interests, the
——provision II.2.7 Dutch corporate governance code and enterprises connected with TNT and all interested parties,
recommendation 23 of the Frijns Committee: maximum such as shareholders and employees, by, among other things,
remuneration in the event of dismissal of members of the preventing as much as possible influences which would threaten
Board of Management. See chapter 7 under Remuneration TNT’s continuity, independence and identity contrary to such
in 2007. interests. The Foundation is an independent legal entity and is
——For the contractual severance payments (other than not owned or controlled by any other legal person.
related to a change in control) for members of the Board
of Management who are not residents of the TNT’s articles of association provide for protective preference
Netherlands, TNT follows local market practice for that shares B that can be issued to the Foundation to serve these
part of the base salary earned in the country of interests. The preference shares B have a nominal value of
residence. This is done to ensure that TNT can offer a €0.48 and have the same voting rights as TNT’s ordinary shares.
competitive package to foreign members of the Board of There are currently no preference shares B issued, although the
Management commensurate with local practice. Foundation has a call option to acquire a number of preference
——In case of a change in control, the members of the Board shares B not exceeding the total issued amount of shares minus
of Management are entitled to a severance payment one and minus any shares already issued to the Foundation.
consisting of the sum of the last annual base salary and
pension contribution plus the average bonus received The exercise price with respect to the call option is the nominal
over the last three years multiplied by two. TNT is of the value of €0.48 per preference share B, although upon exercise
opinion that such payment is realistic taking into account only €0.12 per preference share B is required to be paid. The
the special position of members of the Board of additional €0.36 per preference share B is due at such time as
Management in a change in control situation. Also, the TNT makes a call for payment by resolution of its Board of
Supervisory Board may decide that the performance Management, which resolution is subject to the approval of the
shares vest in whole or in part. Supervisory Board. The Foundation has a credit facility in place
——provision III.3.4 Dutch corporate governance code: to enable it to pay the exercise price.
maximum number of Supervisory Board positions held by
50
Growth through networks members of the Supervisory Board with Dutch listed TNT and the Foundation have entered into the call option
Annual report 2007 companies until 3 May 2007 and as of 1 January 2008. See agreement to prevent, delay or complicate unsolicited influence
this chapter under Members of the Supervisory Board. of shareholders, including an unsolicited take-over or
CHAPTER 6
Corporate ——recommendations 25 and 26 of the Frijns Committee: the concentration of power. The issue of preference shares B
governance relation between performance targets and remuneration enables TNT to consider its position in the then-existing
should be made visible ex ante and ex post. The circumstances. The preference shares B will be outstanding
performance targets should be definite, quantified and no longer than strictly necessary. Once the reason for the
placing of the preference shares B no longer exists, TNT shall shares B, without causing a dilution of the rights of other
propose to the general meeting of shareholders to cancel the shareholders at that stage.
preference shares B entirely as a class.
The members of the board of the Foundation are J. den Hoed
After six months have expired since the acquisition of (chairman), R. Pieterse, J.H.M. Lindenbergh, W. van Vonno and
preference shares B, the Foundation may require TNT to M.P. Nieuwe Weme. All members of the Board of the
convene a general meeting of shareholders to discuss Foundation are independent from TNT. This means that the
cancellation of the preference shares B. However, should the Foundation is an independent legal entity in the sense referred
Foundation within this period of six months receive a demand to in section 5:71 paragraph 1 sub c of the Netherlands Financial
for repayment under the credit facility referred to above, it may Markets Supervision Act (Wet op het financieel toezicht).
also require TNT to convene said meeting. In accordance with
TNT’s current articles of association a general meeting of
shareholders shall be convened by TNT ultimately twelve
months after the first date of issuance of any preference shares
Controls and procedures
B to the Foundation for the first time. The agenda for that
meeting shall include a resolution relating to the repurchase or
Risk Management, Internal Control,
cancellation of the preference shares B.
Integrity and Compliance Systems
At the annual general meeting of shareholders held on 20 April This section provides an overview of TNT’s approach to risk
2007, the shareholders rejected the proposal to extend the management, internal control, integrity and compliance in
then-current authority of the Board of Management to issue achieving its strategic objectives. The nature and, where
preference shares B for another period of eighteen months. possible, the extent of TNT’s exposure to risks is described in
This authority enabled the Board of Management to initiate a chapter 11. TNT recognises five categories of risks, namely
placement of preference shares B with the Foundation following strategic risks, operational risks, legal and regulatory risks,
the put option agreement. As from 20 October 2007 the Board financial risks, and financial reporting risks.
of Management was no longer entitled to initiate such
placement. After careful consideration, it was agreed by TNT The TNT approach to Risk Management, Internal
and the Foundation to terminate the put option agreement as Control, Integrity and Compliance
of 15 February 2008. The management of risks, internal control, integrity and
compliance forms an integral part of the business management
TNT has granted to the Foundation the right to file an within TNT and has been significantly strengthened and
application for an inquiry into the policy and conduct of business embedded into TNT’s business objectives setting processes
of TNT with the Enterprise Chamber of the Amsterdam Court and its operations. A pictorial and narrative description of
of Appeal (Ondernemingskamer). TNT believes that this may be a TNT’s risk management and control framework and its
useful option in the period before the issuance of preference structure is provided below.

TNT Supervisory Board

Board of Management
Statutory / Fiduciary obligations

Group Strategy Development, Corporate Secretary

Group HR
Group Legal
Internal Audit Group Public Affairs Audit
Disclosure Committee Group Communications Group Committees TNT
Ethics Committee Integrity

GHO & Audit Committee

Divisions Supervisory Board

Group Business Group Risk Management

Control Board of & Internal Control Other Supervisory
External Audit Management Board Committees
51
Growth through networks
Annual report 2007

Group Policies / Group Key Controls / Company Wide Controls CHAPTER 6

Corporate
governance
COSO — Enterprise Risk Management / Integrated Framework
 The framework shows that the Board of Management is category and further classified into specific risks and inherent
supported in developing and achieving its strategic, operational risks facing the group. Specific risks are risks that the Board of
and financial objectives by group and division functions in the Management believes could negatively impact TNT’s short to
areas of risk management, control, integrity, reporting, tax, medium term objectives, whilst inherent risks are those risks
treasury, legal and corporate secretary, HR, public affairs and that are constantly present in the business environment but
communications. These supporting functions are responsible which are considered sufficiently material to require
for ensuring that the legal and regulatory compliance objectives disclosure and management.
are achieved. The Board of Management and their related group
and division functions have ensured that the framework is Internal Control over Financial Reporting
established primarily around eight business cycles of group In March 2007, TNT filed with the US Securities and Exchange
policies, procedures and internal controls covering revenue, Commission its Annual Report on Form 20-F for the year end
procurement, HR, financial reporting, treasury, tax, legal and 31 December 2006. At that time, based on its prior
compliance, and information systems. Independent and internal assessment, TNT confirmed that its internal control over
monitoring and oversight functions provide a second and third financial reporting was adequate and effective as of 31
line of control and assurance in addition to that provided by the December 2006 based on section 404 of the Sarbanes-Oxley
line functions. Act of 2002. TNT’s external auditors concurred with TNT’s
conclusion through their auditor’s report 2006 as included in
In 2003 TNT adopted the Committee of Sponsoring chapter 12 on pages 103-104 in the 2006 TNT Annual Report
Organisations of the Treadway Commission (COSO) on Form 20-F, where it is stated that management’s
Enterprise Risk Management – Integrated Framework as the assessment that TNT maintained effective internal control
foundation of its risk management and control system. Built over financial reporting as of 31 December 2006 is fairly
upon this framework is a comprehensive portfolio of group stated in all material respects.
policies and key controls which direct and instil discipline in the
company’s business operations. The Board of Management has On 18 June 2007, TNT delisted its American Depositary
created a group wide structure to support the development Receipts (“ADRs”) from the New York Stock Exchange
and implementation of these policies and controls, thus and filed Form 15-F to deregister and terminate its
facilitating the discharge of statutory and fiduciary obligations. reporting obligations with the US Securities and Exchange
The Supervisory Board, its audit committee and other Commission. Deregistration was completed 90 days later
committees perform an oversight role, whilst the TNT internal on 16 September 2007.
audit function and the company’s external auditors support
the Board of Management and the Supervisory Board in TNT’s Board of Management remains committed to continuing
monitoring the risk management, internal control, integrity to provide a high standard of corporate governance, information
and compliance framework. and disclosure after deregistration from the US Securities and
Exchange Commission, in line with the current Dutch corporate
Risk Management governance code and regulatory requirements. The Board of
Risk-taking is an intrinsic component of doing business. A Management is focused on continuously strengthening TNT’s
structured and transparent risk management process facilitates internal control over financial reporting, whereby the positive
management to manage and prepare for risks in an informed, elements from the Sarbanes-Oxley Act continue to form part of
controlled and transparent manner. TNT’s enterprise-wide risk TNT’s approach to governance, internal control and reporting
management systems are therefore designed to identify because the Board of Management fully believes that this
significant strategic, operational, legal and compliance, financial, approach and investment will continue to support sustainable
and financial reporting risks facing the group in the pursuit of its value creation for the group.
Focus on Networks strategy outlined in chapter 2.
TNT’s specific approach to internal control over financial
Since the implementation of the TNT Group Policy on Risk reporting continues to be generally based on section 404 of
Management in 2003, continuous progress has been made to the Sarbanes-Oxley Act 2002 and the associated guidance to
identify risks at all levels of the organisation and to develop management issued by the US Securities and Exchange
mitigating actions. For those risks deemed to be material, Commission in May 2007 as well as the principles outlined
comprehensive mitigating action plans are developed and in Auditing Standards 2 and 5 as promulgated by the Public
reviewed regularly by the Board of Management. All Companies Accounting Oversight Board (PCAOB). However,
operational units worldwide participate in an annual this does not imply an assessment of the adequacy and
comprehensive risk identification process, the outcome of effectiveness of TNT’s internal control and risk management
which is reported to the relevant divisional group and processes over financial reporting under section 404 of the
functional management. In addition, regular status reports of Sarbanes-Oxley Act, nor is there an attestation by TNT’s
risk mitigating actions are provided to the Board of external auditor.
Management to further strengthen the company’s risk
management processes. In 2007, TNT invested in a dedicated Throughout 2007, TNT continued to invest considerable time
electronic system to transparently manage its risk portfolio and resources documenting and testing the operational
and to improve risk reporting across TNT. The outcome of effectiveness of the company’s internal control over financial
52
Growth through networks the risk management process is shared and discussed with the reporting. TNT has also refined its system of entity level
Annual report 2007 audit committee of the Supervisory Board and the controls which are applicable to all entities worldwide. This
Supervisory Board. latter system includes an integrity awareness and training
CHAPTER 6
Corporate programme, enhanced and more robust group policies and
governance The risks currently facing TNT’s strategic, operational, legal procedures and company wide internal control awareness
and regulatory compliance and financial objectives are training which complement TNT’s risk management, internal
outlined in chapter 11. Risks have been classified by risk control, integrity and compliance systems and processes.
Integrity Corporate Audit Services function, and by the monitoring
TNT’s Integrity Programme consists of four parts: guidance, duties of TNT’s divisional audit committees.
awareness and compliance, embedding and monitoring.

Guidance is set out in the TNT Business Principles which have

Management Summary
been formally adopted and approved by the Board of The Dutch corporate governance code under section II.1.4
Management and Supervisory Board. The TNT Business requires the Board of Management to examine strategic,
Principles, together with other integrity-related group policies operational, legal and regulatory, financial, and financial
and procedures are published on the company’s corporate reporting risks.
website. These group policies deal with topics such as
compliance with laws and regulations, accurate and timely The Board of Management confirms that it is responsible for
disclosure, transparency, equal opportunities, fair treatment, TNT’s risk management, internal control, integrity and
conflict of interest, corruption, fair competition and social compliance systems and has reviewed the operational
responsibility. Among TNT’s integrity-related group policies effectiveness of these systems for the year ended 31 December
and procedures are the TNT Group Policy on Whistleblowing 2007. The outcome of this review and analysis has been shared
and the TNT Group Policy on Disciplinary Actions. The latter with the audit committee and the Supervisory Board and has
policy makes clear that non-compliance with TNT’s group been discussed with TNT’s external auditors.
policies will not be tolerated.
The Board of Management believes to the best of its knowledge
Awareness and compliance are enhanced by communication based on the outcome of the TNT-specific approach to internal
and web-based and interactive training. Interactive integrity control over financial reporting, as outlined above, that TNT’s
workshops have been held for senior and higher management risk management and internal control over financial reporting
in all parts of the world. Senior managers, on the basis of risks have worked effectively over the year ended 31 December
the “train the trainer” principle, thereafter cascade this 2007 and declares that there are no indications that they will
training and communication down into their organisations, not continue to do so in the coming year. The Board of
thus fulfilling their responsibility for the roll-out of the Management also confirms with reasonable assurance that
Integrity Programme. financial reporting is free from material inaccuracies or
misstatement. The Financial Statements fairly represent the
The TNT Business Principles and related group policies are financial condition and results of operations of the company
being embedded in TNT’s strategic and operational decision and provide the required disclosures.
processes. For example, an integrity due diligence procedure
is becoming part of TNT’s mergers and acquisitions process, The above however does not imply that TNT can provide
and new employees of TNT are required to certify their certainty as to the realisation of business and financial strategic
acknowledgement and understanding of the TNT Business objectives, nor can TNT’s approach to internal control over
Principles when they enter employment. financial reporting be expected to prevent or detect all
misstatements, errors, fraud or violation of law or regulations.
The TNT Integrity Programme is monitored in several
ways: (i) senior management sign-off in a Letter of In view of the above, the Board of Management believes that
Representation every half year, (ii) internal audits and (iii) it is in compliance with the requirements of II.1.4 of the
yearly engagement surveys. The TNT Integrity Programme Dutch corporate governance code taking into account the
is part of the entity level controls, and compliance is recommendations of the Frijns Committee.
self-assessed annually by management.

General Compliance
The TNT Business Principles and other group policies and
procedures define “the tone at the top” with regard to ethical
behaviour and TNT’s way of doing business. Group policies
have been reviewed and where necessary revised to strengthen
existing controls. The Board of Management will continue
to focus on this area in the coming year to ensure that there
are effective and efficient group policies as the foundation of
TNT’s risk management, internal control, integrity and
compliance systems.

Strategies have been established for the group and translated

into clear objectives, amongst others, with regard to
business, markets, financial results, human resources and
sustainability. The objectives are reviewed in the annual
strategic review and the budget process for the group and at
53
the level of TNT’s operational units. Performance and Growth through networks
compliance are monitored regularly in discussions between Annual report 2007
the appropriate management and the Board of Management,
CHAPTER 6
through the Letter of Representation (signed by all managing Corporate
and finance directors of TNT’s group entities, and divisional governance
and group level employees that report directly to the Board
of Management), by internal audits carried out by the
 The remuneration committee used professional internal and
external advice. External advice was provided by independent
external advisors, namely:

remuneration ——Allen & Overy LLP provided legal advice on employment

related matters,
——Towers Perrin advised on remuneration market practice
and equity based compensation and provided the valuations
2007 —
Annual report used for long term incentives, and
——Wilfred Klaassen Holding B.V. provided advice relating to
the change of pension arrangements of the Dutch members
of the Board of Management.

These advisors do not advise the members of the Board of

Management personally on their remuneration.

Current remuneration policy

The remuneration policy’s objective is to attract, motivate and
retain qualified members of the Board of Management of the
highest calibre, with an international mindset and background
essential to the successful leadership and effective management
of a large global company. The members of the Board of
Management are rewarded accordingly and the largest part of
After the introduction of the TNT remuneration committee, their remuneration is based on the performance of the
the first part of this chapter outlines the remuneration policy company. The remuneration structure for the Board of
with the different compensation elements as approved by Management is therefore designed to balance short term
TNT’s annual general meeting of shareholders on 20 April 2007. operational performance with the long term objectives of the
The second part reflects the actual remuneration in 2007, company and value creation for its shareholders.
whereas the third part details the 2008 remuneration of the
members of the Board of Management. In the subsequent In order to consistently review the level and structures of the
paragraph elements of the remuneration history of the last total remuneration, the remuneration elements of the
three years are described. Finally, the remuneration of the members of the Board of Management are primarily
members of the Supervisory Board is discussed. benchmarked against a Dutch reference group and secondarily
against a European peer group and TNT’s direct competitors
The remuneration committee of the Supervisory Board is (Deutsche Post AG, Oesterreichische Post, FedEx and UPS).
responsible for assessing and preparing the remuneration policy The Supervisory Board is authorised to make changes to the
for the members of the Board of Management. The Supervisory peer group to deal with the effects of significant corporate
Board approves the proposal and submits, in case of policy events pertaining to members of the peer group. Both the
changes, the proposed remuneration policy to the general Dutch and European groups of companies for the year 2007
meeting of shareholders for adoption. In preparing the are listed in the tables below. The Dutch reference peer group
remuneration policy, the remuneration committee also takes includes a selected group of AEX companies. The European
into account the remuneration of the senior management peer group includes listed companies which are selected
reporting to the Board of Management. The remuneration according to criteria such as industrial sector, international
committee prepares its proposal independently, after careful focus and revenue size, working in a partly regulated
consideration and taking into account the advice of independent environment and people-oriented. All comparisons are made
advisors. The remuneration policy is prepared in accordance on a euro basis and the benchmark comparison is made using
with all relevant Dutch legal requirements, is compliant with the regression method.
the Dutch corporate governance code, and takes into account
the recommendations of the Frijns Committee.

The remuneration committee has four members. In 2007 the

remuneration committee members were Mr. J.M.T. Cochrane
(member and chairman until 26 July 2007), Mr. R.W.H.
Stomberg (chairman as of 26 July 2007), Mr. R. King, Mr. J.H.M.
Hommen, and Mr. S. Levy. None of the members of the
remuneration committee is a member of the management
board of another Dutch listed company or a member of the
54
Growth through networks TNT audit committee. During 2007, the remuneration
Annual report 2007 committee met seven times.
CHAPTER 7
Remuneration
2007 Dutch peer group 2007 European peer group
AEX companies

Unilever; Ahold; Philips Electronics; Akzo Nobel; KPN; Carrefour SA; Deutsche Post AG; Metro AG; Tesco PLC; BT
Heineken; DSM; Randstad; Reed Elsevier; Vedior; Corporate Group PLC; Sainsbury PLC; Air France-KLM; Tui AG; Adecco
Express; Hagemeyer; Wolters Kluwer; ASML Holding; SA; Deutsche Lufthansa; Delhaize SA; PPR SA; Scottish and
Numico; SBM offshore Southern; British Airways Plc; Marks and Spencer Plc; Kuehne
Nagel; SA AB; Securitas AB; G4S Plc; Belgacom SA; Swisscom
AG; Bunzl Plc; Alitalia SPA; Firstgroup Plc; De Samensluttede
A/S; Woolworths Group Plc; Geodis SA; Serco Group Plc;
National Express Group Plc; Rentokil Initial Plc; Atlantia SPA;
Oesterreichische Post AG

The compensation of the members of the Board of Management Financial targets:

contains three elements: ——earnings,
——short term compensation, consisting of base salary and ——revenue growth,
bonus opportunity, ——economic profit, and
——long term compensation, consisting of performance ——cash flow.
shares, and
——pension. Depending on the tasks and responsibilities of each individual
member of the Board of Management, the financial targets are
Short term compensation: related to group and/or division performance.

base salary Mission related non-financial targets:

——general targets related to the implementation of TNT’s
Base salary for the members of the Board of Management strategy,
is set at median level when compared to the peer group ——exceeding customers’ expectations: continued
benchmark data. A check against the peer data is performed improvements in TNT’s relations with customers, which
every two years. are measured through customer satisfaction surveys and by
assessing the relationship with its customers in person,
Short term compensation: bonus ——“instilling pride in our people”: continuous improvement in
engaging TNT’s staff, which is measured through employee
In accordance with the policy approved in 2007, the CEO engagement surveys, and
receives an “at target” bonus opportunity equal to 80% of his ——sharing responsibility for the world, implementing the
base salary and 120% for “stretch” performance. The other agreed standards on responsible global corporate
members of the Board of Management receive an “at target” citizenship and realizing other measurable targets in relation
bonus opportunity equal to 70% of their base salary and 100% to TNT’ s CSR ambitions.
for “stretch” performance. At performance against minimum
target levels, bonus pay-out equals 70% of the base salary for The Supervisory Board assigns specific projects and initiatives
the CEO and 60% of the base salary for the other members of to each member of the Board of Management for which the
the Board of Management. For results below the minimum individual member is personally responsible.
target, no bonus will be paid. The achievement of financial targets accounts for 70% of the
bonus and the non-financial targets for 30% of the bonus.
The bonus scheme for the members of the Board of The realisation of each financial or non-financial target can
Management rewards both financial performance and mission independently result in bonus payments. TNT does not
related non-financial performance. The actual achievements disclose the targets set, as this qualifies as commercially
between the minimum target level and the stretch target level sensitive information.
will lead to a pro-rated bonus. In calculating this pro-rata bonus,
a sliding scale between the minimum bonus level and the stretch
bonus level is used. In the determination of the bonus for
Long term compensation:
non-financial performance, no stretch bonus level or sliding
scale is used.
performance shares
The Supervisory Board allocates the bonus based on the In order to align the objectives of the Board of Management
achievement of the targets of the Board of Management and with the value-creation objectives of the shareholders,
determines the associated pay-out. members of the Board of Management are awarded conditional
rights on TNT shares under the TNT Performance Share Plan.
55
The Supervisory Board sets the targets for the bonus scheme These performance shares, due to their long term nature, are Growth through networks
at the beginning of each financial year. The following financial inherently and significantly more open to market uncertainties Annual report 2007
and non-financial targets could apply: than short term compensation elements.
CHAPTER 7
Remuneration
The value of the total of shares granted to the members of the
Board of Management under the Performance Share Plan is
benchmarked against market practice, using the peer group as
 reference, resulting in the grant value of the performance Shares granted to the Board of Management via the
shares. The number of shares to be granted is calculated Performance Share Plan are granted without financial
by dividing the grant value by the share price on the day consideration and must be retained for a period of at least five
following the announcement of first quarter results multiplied years after grant or until at least the end of employment, if this
by 1.5 due to the opportunity for stretch performance. This period is shorter. This is not necessary if it can be demonstrated
number of granted shares represents 150% of the “at target” that their sale is prompted by required tax payments with
base allocation. respect to these shares.

The current Performance Share Plan vests after a three year

period, and the actual number of shares that can vest varies
Pension
between 0% and the above mentioned 150%. To determine the The pension policy for the Dutch members of the Board of
actual percentage, the performance plan vests against a Management was modified in 2007. As of 1 January 2007, the
performance schedule in which the Total Shareholder Return pension scheme applicable to the Dutch members of the Board
(TSR) of the company is compared to the total shareholder of Management changed from a final pay scheme to a career
return of peer group companies. This TSR peer group of average scheme. The main features of the career average
companies consists of all AEX companies and TNT’s direct scheme are:
competitors. The TSR is defined for this purpose as the return ——retirement age at 65,
to shareholders from investing in shares, in terms of both share ——pensionable income is based on average annual base
price appreciation and dividends, assuming reinvestment of salary only,
dividends. The benchmark companies used for the purpose of ——annual accrual rate for the old-age pension is 2.25%,
TSR all have different risk profiles. TSR results are weighted ——offset for state pension at fiscal minimum,
against a risk factor to reflect these differences in profiles. ——benefits are indexed during accrual, and
——no employee contribution.
During the three year vesting period, the TSR data and risk
profiles are compiled and reported by an external data Pension arrangements should be in line with local practice in the
provider. After three years, the final performance of the country of residence of the member of the Board of
company over the three years compared to the final Management. The pension arrangements for all members of
performance of the peer group determines the number of the Board of Management include entitlement to a pension in
shares to be vested. the event of illness or disability and a spouse’s/dependant’s
pension on death.
The remuneration committee advises the Supervisory Board
on the percentage of performance shares that vest: between
0% and 150% – vesting on the basis of a sliding performance
Members of the Board
scale using a performance zone of -20% and + 20% TSR
performance. The performance schedule is designed in such a
of Management
way that a TSR performance of the company at median level Members of the Board of Management are appointed for a
(half of the companies in the peer group deliver a higher TSR period of four years. On expiry of the four-year term, a
and half of the companies deliver a lower TSR) leads to a member of the Board of Management may be reappointed for
vesting of half of the maximum allocation (150%) of granted successive terms of four years each. Details on each member’s
rights on shares. appointment are set out below.

Term of Board member Year of (re) Term of

Employed since employment since appointment appointment

Peter Bakker 14 October 1991 Indefinite 1998 2004 Four years

Henk van Dalen 1 April 2006 Indefinite 2006 2006 Four years
Harry Koorstra 1 October 1991 Indefinite 2000 2005 Four years
Marie-Christine Lombard 15 December 1999 Indefinite 2004 2004 Four years

Termination of the contractual arrangements of the Dutch For non-Dutch members of the Board of Management, the
members of the Board of Management requires a notice period company follows local market practice for that part of the base
of six months. salary earned in the country of residence.

The contractual severance payments for the Dutch members of For all members of the Board of Management, in case of change
the Board of Management are: in control of the company, the Supervisory Board may in its
56 ——severance payments other than related to a change in discretion allow all or part of the allocations of performance
Growth through networks control are of one year base salary or a maximum of two shares and/or matching shares to vest on the date on which
Annual report 2007 years base salary in the first four-year term, if one year is control of the company passes.
considered to be unreasonable. Contracts entered into
CHAPTER 7
Remuneration prior to 2004 remain unaltered. The company does not grant loans, including mortgage loans, to
——severance payments in case of change in control equal the the members of the Board of Management.
sum of the last annual base salary and pension contribution
plus the average bonus received over the last three years,
multiplied by two.
Compensation in 2007 ratio between fixed (base salary) and performance related
variable income (short term incentive and long term incentive
This part of chapter 7 describes the compensation in 2007 and excluding compensation waived – see below) was for Peter
pension arrangements for the members of the Board of Bakker 1 : 1.34, for Henk van Dalen 1 : 0.98, for Harry Koorstra
Management as reflected in the financial statements. 1 : 1.24 and for Marie-Christine Lombard 1 : 1.39. For detailed
disclosure of the remuneration paid to individual members of
TNT considers variable compensation to be an important part the Board of Management, see note 19 of the consolidated
of the remuneration package for the members of the Board of financial statements.
Management. Therefore, a substantial part of the total
compensation of the members of the Board of Management The table below summarises the 2007 compensation elements
consists of variable compensation on performance. The 2007 of the members of the Board of Management.

Compensation Base Other Accrued Accrued long Pension Waiver of

Board of Management salary periodic paid short term term incentive related granted
2007 compensation 2007 incentive (excluding waiver) costs shares 2007

Peter Bakker 900,000 119,858 770,876 438,235 125,883 358,617

Henk van Dalen 600,000 530,227 462,134 128,195 403,324 203,978
Harry Koorstra 600,000 107,503 519,891 221,197 117,865 203,978
Marie-Christine Lombard 600,000 471,840 511,327 323,099 276,000 203,978

Total 2,700,000 1,229,428 2,264,228 1,110,726 923,072 970,551

(in €)

The amounts included in the column accrued short term been recognized for services received over the remaining of the
incentive and accrued long term incentive represent the IFRS vesting period is recognised immediately as cost. The factual
cost in 2007 of non-vested entitlements relating to 2007 and effect of the waiver of a significant portion of the granted shares
previous years. implies that the individual board members no longer will be able
to benefit from such granted shares. Therefore these waived
Waiver of part of rights/accelerated vesting, although part of the 2007 cost as
prescribed by IFRS, have no actual compensation value for each
compensation over 2007 member of the Board of Management.

To underline its understanding of the measures requested from By this action a potential amount of €970,551 (IFRS costs of
employees in connection with further planned cost reductions waived performance shares, the factual amount to be derived
at TNT Post Netherlands, the Board of Management in from the value of such shares as if such shares would have
consultation with the Supervisory Board decided not to accept vested at the date of vesting in 2010) and an amount of
an increase of 5% of base salary as of 1 January 2007. As a result, €255,720 (waived 2007 bonus) will become available for the
base salary for the members of the Board of Management has TNT mobility budget. The waiver of bonus and performance
not increased since 2004 and amounted to €900,000 for the shares relates to the year 2007 only and will not structurally
CEO and €600,000 for the other members of the Board affect subsequent years.
of Management.

Next to the above mentioned base salary, an increase in granted

shares and bonus opportunity was part of the approved 2007
Remuneration in 2008
remuneration policy. In a letter dated 30 August 2007, the Compared to 2007, no changes in the 2008 remuneration policy
Board of Management, taking into account the context of the are proposed. The Supervisory Board has not modified the
announced significant restructurings in the Mail division, remuneration components in the policy that would lead to a
announced its intention to also waive these increases in the change in the fixed to variable compensation ratio.
2007 remuneration package. The members of the Board of In its proposals for the 2008 remuneration, the remuneration
Management announced their intention to waive that part of committee decided to advise the Supervisory Board to apply
their 2007 bonus opportunity and granted rights on shares that caps for the short term and long term incentives as an
would exceed the received bonus over 2006 and granted rights important part of the 2008 remuneration package for the
on performance shares in 2006 (corrected for the loss of Bonus members of the Board of Management. This decision was
Matching Shares in 2007) and make these waived components taken in close consultation with the members of the Board of
available for the TNT mobility budget. Each of the members of Management and underlines the understanding of the measures
the Board of Management has subsequently individually requested from employees in connection with further planned
57
confirmed this decision in letters dated 12 December 2007. cost reductions in TNT Post Netherlands. These caps Growth through networks
This decision reduces the 2007 level of compensation of the effectively keep the short and long term incentives at the Annual report 2007
Board of Management members to a level comparable with the 2006 level.
CHAPTER 7
2006 level of compensation. However, under IFRS 2 the waived Remuneration
portion of the granted performance shares qualifies as a The structure of the long term and short term incentive
modification that needs to be accounted for as an accelerated schemes will be subject to a review by the Remuneration
vesting. As a result, the amount which otherwise would have Committee in the course of 2008.
 Within the policy, the following compensation decisions have
been made:
Elucidation compensation
package Board of
Base salary 2008
The remuneration committee has agreed a 2% base salary
Management 2006 – 2008
increase, effective 1 January 2008. The 2% increase is calculated During 2007 the Board of Management, in consultation with
based on collective labour agreement developments in base the Supervisory Board, decided to cap the 2007 compensation
salary for collective labour agreement employees in six major package at the 2006 level. The mix of the compensation
European countries in which TNT carries out business. package, excluding the unchanged pension scheme, is illustrated
in the table below and contains a base salary, a cash bonus
The base salary of the CEO is set at €918,000 (2007: €900,000) entitlement, matching shares related to such cash bonus and a
and the base salary for the other members of the Board of performance share grant. The base salary is paid and accounted
Management is set at €612,000 (2007: €600,000). for in the same year. The cash bonus is accrued in the year of
entitlement and paid in the spring of the next year. The bonus
Short term incentive matching shares, although accounted for under IFRS over the
vesting period starting in the year of actual payment of the cash
The level of short term incentive is maintained at policy level, bonus, are calculated as 25% of the accrued gross bonus of the
but the actual pay-out is capped at the pay-out level of fiscal previous year divided by the share price. Performance shares
year 2006 (paid out in 2007). The maximum bonus to be earned under IFRS are accounted for the over the vesting period
by the CEO is therefore €675,000 and the maximum bonus starting in the year of grant.
that can be earned by the other members of the Board of
Management is €450,000. 2006/2007 2007/2008 2008/2009
CEO
Long term incentive Base salary (in €) 900,000 900,000 918,000
The grant level of long term incentive is maintained at policy Bonus (in €) 675,000 675,000 max. 675,000
level but the 2008 grant will be capped in two ways: (capped) (capped)
Matching shares 5,213 0 0
——the granted number of shares will not exceed the 2007
number of shares after waiver (CEO: 37,275 shares, other Performance shares 32,062 37,275 37,275
members of the Board of Management: 19,508 shares); (after waiver) (capped)
——in case of a change in control, the proceeds of the 2008
performance share grant will be capped at the level of the Member of the Board
sum of:
Base salary (in €) 600,000 600,000 612,000
——the share price at the time of the announcement of the
intention to make a public offer, and Bonus (in €) 450,000 450,000 max. 450,000
(capped) (capped)
——50% of the difference between the ultimate share price
paid by the buyer and the price as calculated under the Matching shares 3,476 0 0
previous bullet. Performance shares 16,032 19,508 19,508
(after waiver) (capped)
Pension
The pension scheme remains unchanged. The table demonstrates the intended stability of the total
compensation package over the period 2006 – 2008.
Other
The Supervisory Board has introduced a “claw-back” clause
Performance shares
in the situation that the financial information on which the In order to improve the understanding on the factual outcome
pay-out of variable remuneration was based is determined to of the performance share component in the compensation in
be incorrect. any year, TNT provides an explanation on this matter below.
Performance shares are the shares granted under the TNT
The Supervisory Board has the discretionary power to decide Performance Share Plan. Under this plan, rights on performance
on one-off payments to members of the Board in special shares have a three year vesting period. The following graph,
circumstances. When applicable, such payments are always for illustrative purposes, shows the value of the performance
explained and disclosed. shares that have vested in 2005, 2006 and 2007 under the
performance schedule, based on the share price at the moment
of vesting (however, these shares subsequently still need to be
retained by the Board Members for another two years after
58
Growth through networks vesting before they may be sold). Next to the vested value, the
Annual report 2007 table reports the maximum value of the shares that could have
vested on the same basis if all shares originally granted would
CHAPTER 7
Remuneration have vested.
Peter Bakker Henk van Dalen 1 Harry Koorstra Marie-Christine Lombard 2

500,000 500,000 500,000 500,000

400,000 400,000 400,000 400,000
300,000 300,000 300,000 300,000
200,000 200,000 200,000 200,000
100,000 100,000 100,000 100,000
0 0 0 0
2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007

Maximum value of performance shares 1 — Mr. Van Dalen was not employed in the years 2002, 2003 and 2004, when the shares were granted.
Value of vested performance shares 2 — Ms. Lombard was not a member of the Board in the years 2002 and 2003, when the shares were granted.

IFRS requires an entity to reflect in its profit and loss and the value. The amount included in the profit and loss is
financial position the effects of share based payment calculated by amortising the total value of the performance
transactions, including transactions in which performance grant over the vesting period.
shares are granted to employees. IFRS requires the entity to In the public domain however, a performance share grant is
measure the value of these grants by reference to the fair often wrongfully calculated as full income at the moment of
market value of the respective equity instrument, taking into grant by multiplying the maximum number of shares times the
account the terms and conditions upon which those equity share price on the date of grant. Due to the three year vesting
instruments were granted. The Monte Carlo valuation period and the intrinsic uncertainty of the outcome of the
technique is used to estimate the fair value of the performance performance schedule and the other conditions to be met, the
shares at the date of grant of such shares. The Monte Carlo vested value can and will be significantly different. This is also
technique is consistent with generally accepted valuation illustrated by the table below which includes the IFRS value of
methodologies for pricing financial instruments and the performance shares granted in 2007, compared with the
incorporates all factors and assumptions that knowledgeable, hypothetical value assuming vesting per 31 December 2007.
willing market participants would consider in setting the price. At this date the pro forma number of shares vesting would
In addition, for vesting conditions other than market conditions, then have been 52% of the base allocation. Both values
for instance the employee remaining in the entity’s employ for a differ significantly from calculations as often used in the
specific period of time, statistical evidence is used to adjust the public domain (please also refer to note 19 in chapter 8:
number of equity instruments included in the measurement of Consolidated financial statements).

maximum number of total number of shares value as if

shares granted in 2007 value assumed value as if vested per vested per 31
(excluding waived portion) by public domain under IFRS 31 Dec 2007 Dec 2007

Peter Bakker 37,275 1,203,237 533,226 12,922 365,047

Henk van Dalen 19,508 629,718 279,066 6,763 191,055
Harry Koorstra 19,508 629,718 279,066 6,763 191,055
Marie-Christine Lombard 19,508 629,718 279,066 6,763 191,055

Total 95,799 3,092,392 1,370,424 33,211 938,211

(in €, except percentages)

Remuneration members
of the Supervisory Board
The remuneration of the members of the Supervisory Board is Supervisory Board Base fee
comprised of base compensation and variable compensation Chairman 60,000
linked to attendance of the meetings of the committees of the
Member 45,000
Supervisory Board. The members of the Supervisory Board do
not receive any compensation related to performance and/or Committees Meeting fee
59
equity and do not accrue any pension rights with the company. Audit & Remuneration Chairman 2,500 Growth through networks
The members of the Supervisory Board do not receive any Annual report 2007
Member 1,500
severance payment in the event of termination. TNT does not CHAPTER 7
grant loans, including mortgage loans, to any member of the Nomination & Public Affairs Chairman 1,500 Remuneration
Supervisory Board. The remuneration of the Supervisory Member 1,000
Board has not changed since 2006. (in €)
 financial
statements
2007 —
Annual report

60
Annual report 2007
Growth trough networks

CHAPTER 8
Financial
Statements
Index – to financial statements of TNT N.V.

Consolidated balance sheets 62

Consolidated statements of income 63
Consolidated cash flow statements 64
Consolidated statements of changes in total equity 65
Notes to the consolidated financial statements 66
Notes to the consolidated

1
2
Intangible assets
Property, plant and equipment
75
77
balance sheets 3
4
Financial fixed assets 79
80
Inventory
5 Accounts receivable 80
6 Prepayments and accrued income 81
7 Cash and cash equivalents 81
8 Assets held for sale/liabilities related to assets qualified as held for sale 81
9 Equity 81
10 Pension assets 81
11 Other employee benefits 83
12 Other provisions 87
13 Long term debt 88
14 Other current liabilities 89
15 Accrued current liabilities 90

Notes to the consolidated 16

17
Net sales
Other operating revenues
90
90
statements of income 18
19
Other income 90
90
Salaries, pensions and social security contributions
20 Depreciation, amortisation and impairments 98
21 Other operating expense 98
22 Net financial income and expenses 99
23 Income taxes 99

Notes to the consolidated 24

25
Net cash from operating activities (Continuing operations)
Net cash used in investing activities (Continuing operations)
101
102
cash flow statements 26
27
Net cash used in financing activities (Continuing operations) 102
103
Reconciliation to cash and cash equivalents
28 Business combinations 103
29 Commitments and contingencies 105
29 Financial risk management 106
29 Financial instruments 109
29 Earnings per share 112
33 Joint ventures 112
34 Related party transactions and balances 113
35 Segment information 113
36 Subsequent events 117
37 Postal regulation and concession 118

TNT N.V. Corporate balance sheets / Corporate statements of income 120

Notes to the corporate balance sheets and statements of income 121
38 Total financial fixed assets 121
39 Pension asset 122
40 Equity 123
41 Other current liabilities 124
42 Wages and salaries 124
43 Commitments not included in the balance sheet 124
44 Subsidiaries and associated companies at 31 December 2007 124
45 Other information 125

 Consolidated balance sheets
At 31 December 2007 variance % 2006
Non-current assets
1 Intangible assets
Goodwill 1,828 1,573
Other intangible assets 291 212

total 2,119 18.7 1,785

2 Property, plant and equipment
Land and buildings 847 823
Plant and equipment 349 342
Aircraft 387 306
Other 163 162
Construction in progress 39 45

total 1,785 6.4 1,678

3 Financial fixed assets
Investments in associates 83 58
Other loans receivable 5 7
23 Deferred tax assets 203 211
Prepayments and accrued income 34 38

total 325 3.5 314

10 Pension assets 1 594 18.8 500
Total non-current assets 4,823 12.8 4,277
Current assets
4 Inventory 30 29
5 Accounts receivable 1,656 1,561
23 Income tax receivable 35 8
6 Prepayments and accrued income 236 227
7 Cash and cash equivalents 295 297

total 2,252 6.1 2,122

8 Assets held for sale 10 (97.6) 409

Total assets 7,085 4.1 6,808

Equity
Equity attributable to the equity holders of the parent 1,931 1,983
Minority interests 20 25
9 total 1,951 (2.8) 2,008
Non-current liabilities
23 Deferred tax liabilities 298 240
10 Provisions for pension liabilities 1 437 523
11 Other employee benefit obligations 55 57
12 Other provisions 145 106
13 Long term debt 1,294 1,183
Accrued liabilities 3 3

total 2,232 5.7 2,112

Current liabilities
Trade accounts payable 336 308
11 12 Short term provisions 162 87
14 Other current liabilities 1,188 731
62 23 Income tax payable 69 280
Growth through networks
15 Accrued current liabilities 1,147 1,136
Annual report 2007

CHAPTER 8 total 2,902 14.2 2,542

Financial
8 Liabilities related to assets classified as held for sale 0 - 146
Statements

Total liabilities and equity 7,085 4.1 6,808

(in € millions, except percentages)
1 – the comparative numbers have been changed due to a change in presentation as introduced in 2007. See the summary of significant accounting policies.
— the figures in the line items of these financial statements refer to the notes to the financial statements.
— the accompanying notes form an integral part of the financial statements.
 Consolidated statements of income
Year ended at 31 December 2007 variance % 2006
16 Net sales 10,885 9,948
17 Other operating revenues 132 112

Total revenues 11,017 9.5 10,060

18 Other income 75 15.4 65
Cost of materials (423) (409)
Work contracted out and other external expenses (4,806) (4,160)
19 Salaries and social security contributions (3,608) (3,384)
20 Depreciation, amortisation and impairments (349) (318)
21 Other operating expenses (714) (578)

Total operating expenses (9,900) (11.9) (8,849)

Operating income 1,192 (6.6) 1,276

Interest and similar income 97 199
Interest and similar expenses (191) (246)
22 Net financial (expense)/income (94) (100.0) (47)
Results from investments in associates 1 (6)

Profit before income taxes 1,099 (10.1) 1,223

23 Income taxes (316) (395)

Profit for the period from continuing operations 783 (5.4) 828
8 Profit/(loss) from discontinued operations 206 (157)

Profit for the period 989 47.4 671

Attributable to:
Minority interests 3 200.0 1
Equity holders of the parent 986 47.2 670

Earnings per ordinary share (in € cents) 1 257.4 159.3

Earnings per diluted ordinary share (in € cents) 2 256.1 158.1
Earnings from continuing operations per ordinary share (in € cents) 1 203.6 196.6
Earnings from continuing operations per diluted ordinary share (in € cents) 2 202.6 195.1
Earnings from discontinued operations per ordinary share (in € cents) 1 53.8 (37.3)
Earnings from discontinued operations per diluted ordinary share (in € cents) 2 53.5 (37.0)

(in € millions, except percentages and per share data)

1 – In 2007 based on an average of 383,028,938 of outstanding ordinary shares (2006: 420,701,641). See note 32.
2 – In 2007 based on an average of 385,071,986 of outstanding ordinary shares (2006: 423,859,222). See note 32.
— the figures in the line items of these financial statements refer to the notes to the financial statements.
— the accompanying notes form an integral part of the financial statements.

63
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 Consolidated cash flow statements
Year ended at 31 December 2007 variance % 2006
Cash flows from continuing operations
Profit before income taxes 1,099 1,223
Adjustments for:
Depreciation, amortisation and impairments 349 318
Share based payments 13 9
Investment income:
(Profit)/loss on sale of property, plant and equipment (72) (61)
Interest and similar income (97) (199)
Foreign exchange (gains) and losses 3 0
Interest and similar expenses 188 246
Results from investments in associates (1) 6
Changes in provisions:
Pension liabilities (179) (124)
Other provisions 87 10
Changes in working capital:
Inventory 0 (5)
Trade accounts receivable (132) (131)
Other accounts receivable 38 (39)
Other current assets (9) (29)
Trade accounts payable 28 80
Other current liabilities excluding short term financing and taxes (2) 34

Cash generated from operations 1,313 (1.9) 1,338

Interest paid (178) (199)
Income taxes paid (492) (282)
24 Net cash from operating activities 643 (25.0) 857
Acquisition of group companies (net of cash) (287) (89)
Disposal of group companies and joint ventures 486 1,365
Investments in associates (29) (20)
Disposal of associates 7 0
Capital expenditure on intangible assets (97) (103)
Disposal of intangible assets 0 2
Capital expenditure on property, plant and equipment (272) (277)
Proceeds from sale of property, plant and equipment 85 65
Other changes in (financial) fixed assets 1 7
Changes in minority interests 0 7
Interest received 85 111
Dividend received 13 0
25 Net cash used in investing activities (8) (100.7) 1,068
Repurchases of shares (710) (1,747)
Cash proceeds from excercise of shares/options 29 52
Proceeds from long term borrowings 659 2
Repayments to long term borrowings (20) (53)
Proceeds from short term borrowings 99 328
Repayments to short term borrowings (357) (166)
Repayments to finance leases (19) (10)
Dividends paid (298) (282)
Financing relating to our discontinued operations (18) (276)
26 Net cash used in financing activities (635) 70.5 (2,152)

Change in cash from continuing operations 0 - (227)

64
Growth through networks Cash flows from discontinued operations
Annual report 2007 Net cash from operating activities (19) (63)
CHAPTER 8 Net cash used in investing activities 4 (30)
Financial Net cash used in financing activities 16 36
Statements

Change in cash from discontinuing operations 1 (57)

27 Total changes in cash 1 (284)
(in € millions, except percentages)
— the figures in the line items of these financial statements refer to the notes to the financial statements.
— the accompanying notes form an integral part of the financial statements.
Consolidated statements of changes in total equity
Issued Additional Attributable
share paid in Translation Hedging Other Retained to equity holders Minority Total
capital capital reserve reserve reserves earnings of the parent interest equity
Balance at 31 December 2005 230 1,421 (16) (12) 1,080 559 3,262 17 3,279
Profit for the period 670 670 1 671
Gains/(losses) on cashflow hedges, net of tax (9) (9) (9)
Currency translation adjustment (1) (1) (1)

Total recognised income for the year 0 0 (1) (9) 0 670 660 1 661
Final dividend previous year (173) (173) (173)
Appropriation of net income 386 (386) 0 0
Interim dividend current year (109) (109) (109)
Repurchases and cancellation of shares (27) (176) (1,533) (1,736) (1,736)
Share based compensation 13 13 13
Other 12 54 66 7 73

Total direct changes in equity (27) (176) 12 0 (1,080) (668) (1,939) 7 (1,932)

Balance at 31 December 2006 203 1,245 (5) (21) 0 561 1,983 25 2,008

Profit for the period 986 986 3 989

Gains/(losses) on cashflow hedges, net of tax (1) (1) (1)
Currency translation adjustment (81) (81) (81)

Total recognised income for the year 0 0 (81) (1) 0 986 904 3 907
Final dividend previous year (183) (183) (183)
Appropriation of net income 378 (378) 0 0
Interim dividend current year (115) (115) (115)
Repurchases and cancellation of shares (21) (263) (423) (707) (707)
Share based compensation 14 14 14
Other 4 31 35 (8) 27

Total direct changes in equity (21) (263) 4 0 0 (676) (956) (8) (964)

Balance at 31 December 2007 182 982 (82) (22) 0 871 1,931 20 1,951
(in € millions)

65
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 Notes to the consolidated Summary of significant
financial statements accounting policies
The consolidated financial statements of TNT have been
prepared in accordance with International Financial Reporting
General information and Standards (IFRS) as adopted by the European Union (EU).
IFRS includes the application of International Financial
description of the business Reporting Standards including International Accounting
Standards (IAS) and related Interpretations of the International
TNT N.V. is a public limited liability company having its official Financial Reporting Interpretations Committee (IFRIC)
seat in Amsterdam, the Netherlands. The consolidated financial and Interpretations of the Standing Interpretations
statements include the financial statements of TNT N.V. and its Committee (SIC).
consolidated subsidiaries (hereafter referred to as “TNT” or
“the company”). The company’s name changed from TNT Post The International Accounting Standards Board (IASB) has
Group N.V. to TPG N.V. on 6 August 2001 and from TPG N.V. issued certain International Financial Reporting Standards or
to TNT N.V. on 11 April 2005. TNT N.V. was incorporated amendments thereon, and the IFRIC has issued certain
under the laws of the Netherlands on 29 December 1997 and is interpretations, each of which, when adopted by the EU,
listed on Euronext Amsterdam. could affect TNT’s consolidated financial statements.
Where relevant for the company, TNT has stated the
Since TNT delisted its American Depositary Receipts from the Standards and/or amendments and/or interpretations in
New York Stock Exchange on 18 June 2007, and its reporting ‘Recent IFRS pronouncements’ including the potential impact.
obligations with the United States Securities and Exchange
Commission terminated 90 days later on 16 September 2007, The preparation of financial statements in conformity with
TNT is no longer required to file its annual report on IFRS requires the use of certain critical accounting estimates.
Form 20-F. It also requires management to exercise its judgement in the
process of applying TNT’s accounting policies. The areas
On 30 October 2006, TNT announced the decision to divest its involving a higher degree of judgement or complexity, or
freight management business. On 16 November 2006, the areas where assumptions and estimates are significant to the
company signed a Sale and Purchase Agreement to sell the consolidated financial statements are disclosed in ‘Critical
freight management business to the French logistics service accounting estimates and judgements in applying TNT’s
provider, Geodis SA. On 5 February 2007 TNT completed the accounting policies’.
sale, see note 8 for further information on the sale of freight
management. The policies set out below have been consistently applied to all
the years presented, except for the presentation of the pension
TNT’s freight management business was reported position and TNT’s segment information. Certain
as discontinued operations/assets held for sale as at reclassifications have been made to prior year financial
31 December 2006. Consequently, in the statement of statements to conform to the current’s year presentation.
income for 2007 TNT has presented the net result of its
discontinued freight management business on a separate line As of 2007, TNT has revised the presentation of various pension
‘profit/(loss) from discontinued operations’. In the 2006 balance plans. On the balance sheet the net pension assets or net
sheet the assets and liabilities from freight management have pension liabilities of the respective plans have been presented
been presented as respectively “assets held for sale” and separately instead of netting the total pension position as the
“liabilities held for sale”. plans have a different population of beneficiaries and risk profile.
The net pension plan of the main plan in the Netherlands and the
TNT’s Logistics division was reported as a discontinued other pension plan show a pension asset, wheras the transitional
operation in 2005 and 2006. TNT completed the sale of the pension plan in the Netherlands and the other post employment
Logistics division on 4 November 2006. In the statement of benefit plans show a pension liability. The company has adjusted
income for 2006 TNT presented the net result of its its comparative numbers in the balance sheet as per 31
discontinued logistic business on a separate line ‘Profit/(loss) December 2006 accordingly. This revised presentation has no
from discontinued operations’. impact on TNT’s equity or net profit.

The company manages the business through two divisions: The segment information has been extended by the
Express and Mail and via the business entity Other networks. introduction of a segment named “Other Networks”.
The Express division provides door-to-door express delivery The related segment information was formerly reported as
services for customers sending documents, parcels and freight part of the Express division and prior to the sale of the Logistics
worldwide. The Mail division primarily provides services for division as part of Logistics. In 2007, the company decided to
collecting, sorting, transporting and distributing domestic and present the “Other networks” as a separate segment apart
international mail. Other networks performs special services from the Express division due to the further optimisation of
66
Growth through networks that require deliveries during the night to individually agreed TNT’s network strategy. The Other networks operate a
Annual report 2007 delivery points. network which is different from the Express and/or Mail
network and the services provided are supply chain related
CHAPTER 8
Financial The consolidated financial statements have been authorised for which differs from the Express services. The revised
Statements issue by TNT’s Board of Management and Supervisory Board on presentation has no impact on TNT’s equity or net profit.
18 February 2008 and are subject to adoption at the annual TNT early adopted IFRS 8 ‘Operating Segments’, see section
general meeting of shareholders on 11 April 2008. “Recent IFRS pronouncements”.
All amounts included in the financial statements are presented Associates
in euros, unless indicated otherwise. An associate is an entity, including an unincorporated entity
such as a partnership, that is neither a subsidiary nor an interest
Consolidation in a joint venture and over whose commercial and financial
policy decisions TNT has the power to exert significant
Consolidated financial information, including subsidiaries, influence. Significant influence is the power to participate in the
associates and joint ventures, has been prepared using uniform financial and operating policy decisions of the entity but is not
accounting policies for like transactions and other events in control or joint control over those policies.
similar circumstances. All significant intercompany transactions,
balances and unrealised gains on transactions have been TNT’s share in the results of all significant associates is included
eliminated on consolidation. Unrealised losses are eliminated in the consolidated statements of income using the equity
unless the transaction provides evidence of an impairment of method. The carrying value of TNT’s share in associates
the asset transferred. includes goodwill on acquisition and includes changes to reflect
TNT’s share in net earnings of the respective companies,
The consolidated financial statements include the financial reduced by dividends received. TNT’s share in non-distributed
statements of TNT N.V. and its group companies. A complete earnings of associates is included in other reserves within
list of subsidiaries, associates and joint ventures included shareholders’ equity. When TNT’s share of any accumulated
in TNT’s consolidated financial statements is filed for public losses exceeds the acquisition value of the shares in the
review at the Chamber of Commerce in Amsterdam. associates the book value is reduced to zero and the reporting
This list has been prepared in accordance with the provisions of losses ceases, unless TNT is bound by guarantees or other
of article 379 (1) and article 414 of Book 2 of the Dutch undertakings in relation to the associate.
Civil Code.
Joint ventures
As the financial statements of TNT N.V. are included in the A joint venture is a contractual arrangement whereby TNT
consolidated financial statements, the corporate statements of and one or more parties undertake an economic activity that
income are presented in an abridged form (article 402 of Book is subject to joint control. Joint ventures in which TNT
2 of the Dutch Civil Code). participates with other party(ies) are proportionately
consolidated. In applying the proportionate consolidation
Subsidiaries method, TNT’s percentage share of the balance sheet and
A subsidiary is an entity controlled, directly or indirectly, by income statement items are included in TNT’s consolidated
TNT N.V. Control is regarded as the power to govern the financial statements.
financial and operating policies of the entity so as to obtain
benefits from its activities. The existence and effect of potential
voting rights that are currently exercisable or convertible are
Functional currency
considered when assessing whether TNT controls another
entity. Subsidiaries are fully consolidated from the date on
and presentation currency
which control is transferred to TNT and are de-consolidated Items included in the financial statements of each of the group’s
from the date on which control ceases. entities are measured using the currency of the primary
environment in which the entity operates (“the functional
TNT uses the purchase method of accounting to account currency”). The consolidated financial statements are
for the acquisition of subsidiaries. The cost of an acquisition presented in euros, which is TNT’s functional and presentation
is measured at the fair value of the assets given, equity currency.
instruments issued and liabilities incurred or assumed at
the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and
Foreign currency
contingent liabilities assumed in a business combination are
measured initially at their fair value at the acquisition date,
transactions and balances
irrespective of the extent of any minority interest. Foreign currency transactions are booked in the income
The excess of the cost of acquisition over the fair value of statement and the balance sheet by translating the transactions
TNT’s share of the identifiable net assets acquired is and balances into the functional currency using the exchange
recorded as goodwill. If the cost of acquisition is less than rates prevailing at the date of the transactions. Foreign
the fair value of TNT’s share of the net assets of the exchange gains and losses resulting from the settlement of
subsidiary acquired, the difference is recognised directly foreign currency transactions and balances and from the
in the income statement. translation at year-end exchange rates are recognised in the
income statement except when deferred in equity as qualifying
The interest of minority shareholders in the acquiree is initially cash flow hedges and qualifying net investment hedges.
measured at the minority’s proportion of the net fair value of
the assets, liabilities and contingent liabilities recognised. Losses
applicable to the minority in excess of the minority’s interest in
67
the subsidiary’s equity are allocated against TNT’s interests Growth through networks
except to the extent that the minority has a binding obligation Annual report 2007
and is able to make an additional investment to cover the losses.
CHAPTER 8
Financial
TNT subsidiaries’ accounting policies have been changed Statements
where necessary to ensure consistency with TNT’s Group
accounting policies.
 Foreign operations over the estimated useful life. Apart from software, other
intangible assets mainly include customer lists, assets under
The results and financial position of all group entities (none of development, licences and concessions.
which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation An asset is transferred to its respective intangible asset
currency are translated into the presentation currency category at the moment it is ready for use and is amortised
as follows: on a straight-line method over its estimated useful life.
Other intangible assets are valued at the lower of historical
——assets and liabilities for each balance sheet presented are cost less amortisation and impairment.
translated at the closing rate at the date of that balance
sheet, An impairment review is performed whenever a triggering
——income and expenses for each income statement are event occurs. An intangible asset is impaired if the recoverable
translated at average exchange rates, and amount is lower than the carrying value. The recoverable
——the resulting exchange differences based on the different amount is defined as the higher of an asset’s fair value less costs
ways of translation between the balance sheet and the to sell and its value in use. Assets that have an indefinite useful
income statement are recognised as a separate component life are not subject to amortisation and are tested annually for
of equity (cumulative translation adjustment). impairment. A triggering event is an event or change in
circumstances indicating that the carrying amount may not be
Foreign exchange gains and losses resulting from the settlement recoverable. For the purposes of assessing impairment, assets
of transactions, including foreign currency transactions, and are grouped at the lowest levels for which there are separately
from the translation at the year end exchange rate of monetary identifiable cash flows being the cash generating units.
assets and liabilities denominated in foreign currencies are Impairments are reversed if and to the extent that the
recognised in the income statement, except where hedge impairment no longer exists.
accounting is applied. Foreign exchange differences arising from
the translation of the net investment in foreign entities, and of
borrowings and other currency instruments designated as
Property, plant and equipment
hedges of such investments are taken to the cumulative Property, plant and equipment is valued at historical cost using
translation adjustment on consolidation. When a foreign a component approach, less depreciation or at the recoverable
operation is sold, such exchange differences are recognised in amount whenever impairment has taken place. In addition to
the income statement as part of the gain or loss on the sale. costs of acquisition, the company also includes costs of bringing
the asset to working condition, handling and installation costs
Goodwill and fair value adjustments arising on the acquisition of and the non-refundable purchase taxes. Depreciation is
a foreign entity are treated as assets and liabilities of the foreign calculated using the straight-line method based on the
entity and translated at the closing rate. estimated useful life, taking into account any residual value.
The assets’ residual values and useful lives are reviewed, and
Intangible assets adjusted if appropriate, at each balance sheet date. Subsequent
costs are included in the asset’s carrying amount or recognised
as a separate asset, as appropriate, only when it is probable that
Goodwill future economic benefits associated with the item will flow to
The excess of the cost of acquisition over the fair value of TNT’s the company and the cost of the item can be measured reliably.
share of the identifiable net assets acquired is recorded as
goodwill. Goodwill on acquisitions of subsidiaries and joint Land is not depreciated. System software is capitalised and
ventures is included in intangible assets. Goodwill on acquisition amortised as a part of the tangible fixed asset for which it was
of associates is included in investments in associates and tested acquired to operate, because the estimated useful life is
for impairment as part of the overall balance. inextricably linked to the estimated useful life of the
associated asset.
Separately recognised goodwill arising on acquisitions is
capitalised and subject to impairment review, both annually and An impairment review is performed whenever a triggering
when there are indications that the carrying value may not be event occurs. Property, plant and equipment is impaired if the
recoverable. Goodwill is impaired if the recoverable amount of recoverable amount is lower than the carrying value. The
the cash generating unit to which it is allocated is lower than its recoverable amount is defined as the higher of an asset’s fair
carrying value. The recoverable amount is defined as the higher value less costs to sell and its value in use.
of a cash generating unit’s fair value less costs to sell and its
value in use using the discounted cash flow method. An impairment loss recognised in prior periods for an asset
Impairments on goodwill recognised in prior periods can shall be reversed if, and only if, there has been a change in the
not be reversed. estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognised. For the purposes
For the purpose of assessing impairment, corporate assets are of assessing impairment, assets are grouped at the lowest levels
allocated to specific cash generating units before impairment for which there are separately identifiable cash flows being the
68
Growth through networks testing. The basis for this allocation is to the extent in which cash generating units.
Annual report 2007 those assets contribute to the future cash flows of the cash
generating unit under review. Leases of property, plant and equipment are classified as finance
CHAPTER 8
Financial leases if the company has substantially all the risks and rewards
Statements Other intangible assets of ownership. Finance leases are capitalised at the lease’s
Costs related to the development and installation of software inception at the lower of the fair value of the leased property
for internal use are capitalised at historical cost and amortised and the present value of the minimum lease payments. The
corresponding rental obligations, net of finance charges, are in equity until the forecasted transaction is ultimately
included in long term debt. Property, plant and equipment recognised in the income statement. When a forecasted
acquired under finance leases is depreciated over the shorter of transaction is no longer expected to occur, the cumulative gain
the asset’s useful life and the lease term. or loss that was reported in equity is immediately transferred to
the income statement.
Financial assets and liabilities Loans granted and receivables are non-derivative financial assets
TNT classifies financial assets and liabilities into the following with fixed or determinable payments that are not quoted in an
categories: financial assets and liabilities at fair value through active market and for which TNT has no intention of trading.
profit or loss, loans and receivables, held-to-maturity Loans and receivables are included in trade and other
investments, available-for-sale financial assets and financial receivables in the balance sheet, except for maturities greater
liabilities measured at amortised cost. The classification than 12 months after the balance sheet date. These are classified
depends on the purpose for which the financial asset or liability as non-current assets.
were acquired. Management determines the classification of
TNT’s financial assets and liabilities at initial recognition. Held-to-maturity investments are non-derivative financial
Financial instruments are accounted for in accordance with IAS assets with fixed or determinable payments and fixed
32 and IAS 39. maturities where TNT has the positive intention and ability
to hold to maturity.
Financial assets and financial liabilities at fair value through profit
and loss include derivatives and other assets and liabilities that Available-for-sale financial assets are non-derivatives that are
are designated as such upon initial recognition. either designated in this category or not classified in any of the
other categories above. They are included in non-current assets
Financial assets and financial liabilities at fair value through unless management intends to dispose of the investment within
profit are initially recorded at fair value net of transaction costs 12 months of the balance sheet date. Available-for-sale financial
incurred and subsequently remeasured at fair value on the assets are carried at fair value.
balance sheet. TNT designates certain derivatives as either:
hedges of the fair value of recognised assets and liabilties of a Loans and receivables and held-to-maturity investments are
firm commitment (fair value hedge), hedges of a particular risk carried at amortised cost using the effective interest method.
associated with a recognised asset or liability or a highly Unrealised gains and losses arising from changes in the fair value
probable forecasted transaction (cash flow hedge) or hedges of of financial assets and liabilities classified as at fair value through
a net investment in a foreign operation (net investment hedge). profit and loss are directly recorded in the income statement.
Unrealised gains and losses arising from changes in the fair value
If a derivative is designated as a cash flow or net investment of financial assets classified as available-for-sale are recognised in
hedge, changes in its fair value are considered to be effective equity. When financial assets classified as available-for-sale are
and recorded in a separate component in shareholders’ equity sold or impaired, the accumulated fair value adjustments are
until the hedged item is recorded in income. Any portion of a included in the consolidated statements of income as gain or
change in a derivative’s fair value that is considered to be loss.
ineffective, or is excluded from the measurement of
effectiveness, is immediately recorded in the income statement. The fair values of quoted investments are based on current bid
prices. If the market for a financial asset is not active (and for
TNT documents at the inception of the transaction the unlisted securities), TNT establishes fair value by using valuation
relationship between hedging instruments and hedged items, techniques. These include the use of recent arm’s length
as well as its risk management objective and strategy for transactions, reference to other instruments that are
undertaking various hedge transactions. The company also substantially the same and discounted cash flow analysis refined
documents the assessment, both at hedge inception and on an to reflect the issuer’s specific circumstances.
ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair TNT assesses at each balance sheet date whether there is
values or cash flows of hedged items. objective evidence that a financial asset or a group of financial
assets is impaired. In the case of equity securities classified as
Changes in the fair value of derivatives that are designated and available-for-sale, a significant or prolonged decline in the fair
qualify as fair value hedges are recorded in the income value of the security below its cost is considered in determining
statement, together with any changes in the fair value of the whether the securities are impaired. If any such evidence exists
hedged asset or liability that are attributable to the hedged risk. for available-for-sale financial assets, the cumulative loss
measured as the difference between the acquisition cost and the
Amounts accumulated in equity are recycled in the income current fair value, less any impairment loss on that financial asset
statement in the periods when the hedged item will affect profit previously recognised in income statement is removed from
and loss (for example, when the forecasted sale that is hedged equity and recognised in the income statement. Impairment
takes place). However, when the forecasted transaction that is losses on equity instruments recognised in the income
hedged results in the recognition of a non-financial asset, the statement are not reversed through equity.
69
gains and losses previously deferred in equity are transferred Growth through networks
from equity and included in the initial measurement of the asset Financial liabilities measured at amortised costs are recognised Annual report 2007
or liability. initially at fair value net of transaction costs incurred and
CHAPTER 8
subsequently stated at amortised costs; any difference between Financial
When a hedging instrument expires or is sold, or when the the proceeds (net of transaction costs) and the redemption Statements
hedge no longer meets the criteria for hedge accounting, any value is recognised in the income statement over the period of
cumulative gains or losses existing in equity at that time, remain the financial liability using the effective interest method.
 Inventory Incremental costs directly attributable to the issue of new shares
Inventories of raw materials and finished goods are valued at or options for the acquisition of business combinations are
the lower of historical cost or net realisable value less any included in the cost of acquisition as part of the purchase
provision required for obsolescence. Historical cost is based on consideration.
weighted average prices.
Provisions for pension liabilities
Accounts receivable The obligation for all pension and other post-employment plans
Accounts receivable are recognised initially at fair value and that qualify as defined benefit obligation is determined by
subsequently measured at amortised cost using the effective calculating the present value of the defined benefit obligation and
interest method, less provision for impairment. A provision for deducting the fair value of the plan assets. TNT uses actuarial
impairment of accounts receivable is established when there is calculations (projected unit credit method) to measure the
objective evidence that the company will not be able to collect obligations and the costs. For the calculations, actuarial
all amounts due according to the original terms of the assumptions are made about demographic variables (such as
receivables. The amount of the provision is the difference employee turnover and mortality) and financial variables (such as
between the asset’s carrying amount and the present value of future increases in salaries). The discount rate is determined by
estimated future cash flows, discounted at the effective interest reference to market rates.
rate. The amount of the provision is recognised in the
income statement. Cumulative actuarial gains and losses are recognised for the
portion that these exceed the higher of 10% of the obligation or
Cash and cash equivalents 10% of the fair value of plan assets (corridor approach). The
excess is recognised over the employees’ expected average
Cash and cash equivalents are carried in the balance sheet at fair remaining service lives.
value. Cash and cash equivalents include cash at hand, bank
account balances, bills of exchange and cheques (only those Past service costs, if any, are recognised on a straight-line basis
which can be cashed in the short term). All highly liquid over the average vesting period of the amended pension or early
investments with an original maturity of three months or less at retirement benefits. Certain past service costs may be recognised
date of purchase are considered to be cash equivalents. Bank immediately if the benefits are vested immediately.
overdrafts are not netted off from cash and cash equivalents.
Gains or losses on the curtailment or settlement of a defined
Assets held for sale benefit plan are recognised at the date of the curtailment
or settlement.
and discontinued operations Pension costs for defined contribution plans are expensed in the
Assets (or disposal groups) held for sale are classified as assets consolidated statements of income when incurred or due.
held for sale and stated at the lower of their carrying amount
and fair value less costs to sell if their carrying amount is
recovered principally through a sale transaction rather than
Other employee benefit obligations
through continuing use. Assets held for sale are no longer These employee benefits include long-service leave or sabbatical
amortised or depreciated from the time they are classified leave, jubilee or other long service benefits, long term disability
as such. benefits and, if they are not payable wholly within twelve months
after the end of the period, profit sharing, bonuses and
Operations that represent a separate major line of business or deferred compensation.
geographical area of operations, or that are part of a single
coordinated plan to dispose of a separate major line of business The expected costs of these benefits are recognised over the
or geographical area of operations or is a subsidiary acquired period of employment. Actuarial gains and losses and changes in
exclusively with a view to resale and either have been disposed actuarial assumptions, are charged or credited to income in the
of or have been classified as held for sale, are presented as period such gain or loss occur. All past service costs are
discontinued operations in TNT’s statements of income. recognised immediately.

Equity Other provisions

Ordinary shares are classified as equity. Incremental costs Provisions are recognised when there is a present obligation as a
directly attributable to the issue of new shares or options are result of a past event, it is probable that an outflow of resources
shown in equity as a deduction, net of tax, from the proceeds. embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of
Where any group company purchases TNT’s equity share capital the obligation.
(treasury shares), the consideration paid, including any directly
70
Growth through networks attributable incremental costs (net of income taxes), is deducted Provisions are recorded for restructuring, retirements, onerous
Annual report 2007 from equity attributable to the equity holders of the parent until contracts and other obligations. Provisions are measured at the
the shares are cancelled, reissued or disposed of. Where such present value of management’s best estimate of the expenditure
CHAPTER 8
Financial shares are subsequently sold or reissued, any consideration required to settle the present obligation at the balance sheet date.
Statements received, net of any directly attributable incremental transaction The discount rate used to determine the present value reflects
costs and the related income tax effects, is included in equity current market assessments of the time value of money and the
attributable to the company’s shareholders. risks specific to the liability. Provisions for onerous contracts are
recorded when the unavoidable costs of meeting the obligation or work is completed, using the percentage of completion
under the contract exceed the economic benefits expected to method, based on services provided.
arise from that contract, taking into account impairment of fixed
assets first. The provision recorded for restructuring largely
relates to termination benefits. Termination benefits are payable
Net sales
when employment is terminated before the normal retirement Net sales represent the revenues from the delivery of goods
date, or whenever an employee accepts voluntary redundancy in and services to third parties less discounts, credit notes and
exchange for these benefits. TNT recognises termination benefits taxes levied on sales. Accumulated experience is used to
when the company has committed to terminate the employment estimate and provide for the discounts and returns.
of current employees according to a detailed formal plan without
possibility of withdrawal or provide termination benefits as a
result of an offer made to encourage voluntary redundancy.
Other operating revenues
Benefits falling due more than 12 months after balance sheet date Other operating revenues relate to the sale of goods and
are discounted to their present values. rendering of services not related to TNT’s normal trading
activities and mainly include rental income of temporarily
Trade accounts payable leased-out property, passenger/ charter revenues, aircraft
maintenance and engineering income and custom
Trade accounts payable are recognised initially at fair value and clearance income.
subsequently measured at amortised cost using the effective
interest method.
Other income
Income taxes Other income includes net gains from the sale of property,
plant and equipment and other gains.
The amount of income tax included in the statements of income
is determined in accordance with the rules established by the
taxation authorities, based on which income taxes are payable
Profit-sharing and bonus plans
or recoverable. The company recognises a liability and an expense for cash
settled bonuses and profit-sharing, based on a formula that
Deferred tax assets and liabilities, arising from temporary takes into consideration the profit attributable to its
differences between the nominal values of assets and liabilities shareholders after certain adjustments.
and the fiscal valuation of assets and liabilities, are calculated
using the tax rates expected to apply when they are realised or
settled. Deferred tax assets are recognised if it is probable that
Share based payments
they will be realised. Deferred tax assets and liabilities where a TNT has equity-settled, share based compensation plans.
legally enforceable right to offset exists and within the same Share based payment transactions are transactions in which
consolidated tax group are presented net in the consolidated TNT receives benefits from its employees in consideration for
balance sheets. TNT’s equity instruments. The fair value of the share based
transactions is recognised as an expense (part of the employee
Revenue recognition costs) and a corresponding increase in equity over the vesting
period. The fair value of employee share based payments is
Revenues are recognised when services are rendered, goods calculated using the Monte Carlo model. The equity
are delivered or work is completed. Revenue is the gross inflow instruments granted do not vest until the employee completes
of economic benefits during the current year arising in the a specified period of service.
course of the ordinary activities when those inflows result in
increases in equity, other than increases relating to The amount to be expensed over the vesting period is
contributions from equity participants. determined by reference to the fair value of the equity
instruments granted, excluding the impact of non-market
Revenues of delivered goods and services are recognised when: conditions. These non-market conditions are included in
——the company has transferred to the buyer the significant assumptions about the number of equity instruments that are
risks and rewards of ownership of the goods; expected to vest. At each balance sheet date, TNT revises its
——the company retains neither continuing managerial estimates of the number of equity instruments that are
involvement to the degree usually associated with expected to vest. The impact of the revision to original
ownership nor effective control of the goods sold; estimates is recognised in the income statement with a
——the amounts of revenue are measured reliably; corresponding adjustment to equity.
——it is probable that the economic benefits associated with the
transaction will flow to the company;
——the costs to be incurred in respect of the transaction can be
Interest income and expense
measured reliably; and, Interest income and expense are recognised on a
——the stage of completion of the transaction at the balance time-proportion basis using the effective interest method.
71
sheet date can be measured reliably. Interest income compromise interest income on borrowing, Growth through networks
changes in the fair value of financial assets at fair value Annual report 2007
Revenue is measured at the fair value of the consideration of through profit or loss, foreign currency gains and gains on
CHAPTER 8
received amounts or receivable amounts. hedging income. Financial
Statements
Amounts received in advance are recorded as accrued liabilities Interest expenses comprise interest expense on borrowings,
until services are rendered to customers, goods are delivered unwinding of the discount on provisions, foreign currency
 losses, changes in the fair value of financial assets at fair value
through profit or loss, impairment losses recognised on
Recent IFRS
financial assets and losses on hedging income.
pronouncements
All borrowing costs are recognised in profit or loss using the The IASB has issued certain International Financial Reporting
effective interest method. Standards or amendments thereon, and the IFRIC has issued
certain interpretations, each of which, when adopted could
Grants affect TNT’s financial statements. Where relevant for TNT N.V.
the company has explained the standards and/or amendments
Grants are recognised initially as deferred income when there is and/or interpretations below.
reasonable assurance that they will be received and TNT has
complied with the conditions associated with the grant. Grants New standards and interpretations and amendments to
that compensate TNT for expenses incurred are recognised in published standards effective in 2007:
the income statement on a systematic basis in the same periods ——IFRS 7 Financial Instruments: Disclosures
in which the expenses are recognised. Grants that compensate This standard has no impact on the classification and
TNT for the cost of an asset are deducted from the historical measurement of TNT financial instruments. TNT has
value of the assets and as such recognised in the income included additional financial instruments disclosures including
statement on a systematic basis over the useful life of the asset. comparative figures in the 2007 Financial Statements;
——IAS 1 Presentation of the financial statements- Capital
Operating leases disclosures, introduces new disclosures relating to financial
instruments TNT has included additional disclosures relating
Leases where the lessor retains substantially all the risks and to capital structure management in note 30.
rewards of ownership are classified as operating leases.
Payments made under operating leases (net of any incentives ——IFRIC 7 Applying the Restatement Approach under IAS 29,
received from the lessor) are charged to the income statement Financial Reporting in Hyperinflationary Economies;
on a straight-line basis over the period of the lease. ——IFRIC 8 Scope of IFRS 2 (effective for annual periods
beginning on or after 1 May 2006);
Dividend distribution ——IFRIC 9 Reassessment of Embedded Derivatives (effective for
annual periods beginning on or after 1 June 2006), and
Dividend distribution to TNT’s shareholders is recognised as a ——IFRIC 10 Interim Financial Reporting and Impairment (effective
liability in the financial statements in the year in which the for annual periods beginning on or after 1 November 2006).
dividends are approved by the shareholders.
The Interpretations IFRIC 7, 8, 9 and 10 do not have a material
Accounting principles relating to the impact on TNT’s financial statements.

consolidated cash flow statements Interpretations and standards endorsed

by the EU not yet effective in 2007:
The cash flow statements have been prepared using the indirect ——IFRIC 11 Group and Treasury share transactions (effective for
method. Cash flows in foreign currencies have been translated annual periods beginning on or after 11 March 2007). Group
at average exchange rates. Exchange rate differences affecting and treasury share transactions require a share-based payment
cash items are shown separately in the cash flow statements. arrangement in which an entity receives goods or services as
Receipts and payments with respect to taxation on profits are consideration for its own equity instruments to be accounted
included in the cash flow from operating activities. Interest for as equity-settled share-base payment transaction regardless
payments are included in cash flows from operating activities of how the equity instruments are obtained.
while interest receipts are included in cash flows from investing ——TNT is currently evaluating the impact of adoption of IFRIC 11
activities. The cost of acquisition of new group companies, as of 1 January 2008, but do not anticipate a material impact on
associated companies and investments, insofar as it was paid for its financial statements. This standard has not been adopted by
in cash, is included in cash flows from investing activities. TNT before the effective date.
Acquisitions of group companies are presented net of cash ——IFRS 8 Operating Segments (effective for annual periods
balances acquired. Cash flows from derivatives are recognised beginning on or after 1 January 2009). This standard
in the statement of cash flows in the same category as those of introduces the “management approach” to segment
the hedged item. reporting and will require the disclosure of the segment
information based on internal reports regularly reviewed by
The reconciliation of the cash and cash equivalent balances to the group operating decision makers in order to assess each
the changes in cash according to the cash flow statements is segment’s performance and to allocate resources to them.
presented in note 27 to the consolidated financial statements. ——IFRS 8 ‘Operating Segments’ was early adopted by the
company in 2007 and replaces IAS 14 ‘Segment Reporting’.
Segment reporting As the information provided to the chief operating decision
makers for internal reporting purposes is largely based on
72
Growth through networks Operating segments are reported in a manner consistent with the external reporting requirements three reportable
Annual report 2007 the internal reporting as provided to the chief operating segments have been identified being Express, Mail and
decision makers. The members of the Board of Management of Other networks. Based on the changed internal
CHAPTER 8
Financial TNT are identified as the chief operating decision makers. management structure and relating responsibilities the
Statements company decided to introduce the reportable segment
“Other Networks” which will be disclosed on a voluntary
basis in accordance with IFRS 8.13. There has been no
 further impact on the measurement of the company’s assets
and liabilities. The comparative information has been
Property, plant and equipment
restated where applicable. The impact of adopting of IFRS 8 Property, plant and equipment is valued at historical cost using
on the segment information is limited, see note 35. a component approach, less depreciation or at the recoverable
amount whenever impairment has taken place. Depreciation is
Interpretations and standards not endorsed calculated using the straight-line method based on the estimated
by the EU not yet effective in 2007: useful life, taking into account any residual value. The assets’
——IFRIC 14 The Limit on a defined benefit asset, minimum funding residual values and useful lives are based on TNT’s best estimates,
requirements and their interaction clarifies when refunds or and adjusted if appropriate, at each balance sheet date.
reductions in future contributions in relation to defined benefit
assets should be regarded as available and provides guidance on
the impact of minimum funding requirements on such assets.
Impairment of receivables
The risk of uncollectability of accounts receivable is primarily
TNT has preliminary assessed and reviewed the implications of estimated based on prior experience with, and the past due
IFRIC 14 and expects that this IFRIC will not have a significant status of, doubtful debtors, while large accounts are assessed
impact on TNT’s financial statements. individually based on factors that include ability to pay,
bankruptcy and payment history. In addition, debtors in certain
countries are subject to a higher collectability risk, which is
Critical accounting estimates taken into account when assessing the overall risk of
uncollectability. Should the outcome differ from the
and judgements in applying assumptions and estimates, revisions to the estimated valuation
allowances would be required.
TNT’s accounting policies
The preparation of TNT’s financial statements, in accordance with
Employee benefits
IAS 1, Presentation of Financial Statements, requires TNT to make Post-employment benefits represent obligations that will be
estimates and assumptions that affect the reported amounts of settled in the future and require assumptions to project benefit
assets and liabilities, revenues and expenses, and related obligations. Post-employment benefit accounting is intended to
disclosure of contingent assets and liabilities at the date of TNT’s reflect the recognition of future benefit costs over the
financial statements. TNT’s estimates and judgements are employee’s approximate service period, based on the terms of
continually evaluated and are based on historical experience and the plans and the investment and funding decisions made. The
other factors, including expectations of future events that are accounting requires the company to make assumptions
believed to be reasonable under the circumstances. regarding variables such as discount rate, rate of compensation
increase, return on assets, and future healthcare costs. TNT
TNT makes estimates and assumptions concerning the future. consults with outside actuaries regarding these assumptions at
The resulting accounting estimates will, by definition, seldom least annually. Changes in these key assumptions can have a
equal the related actual results. The estimates and assumptions significant impact on the defined benefit obligations, funding
that have a significant risk of causing a material adjustment to requirements and pension cost incurred. For a discussion of the
the carrying amounts of assets and liabilities within the next current funded status and a sensitivity analysis with respect to
financial year are discussed below. pension plan assumptions, see note 10.

Accounting for business combinations Restructuring

and impairment of goodwill and Restructuring charges mainly result from restructuring
operations, including consolidations and/or relocations of
other long lived intangible assets operations, changes in TNT’s strategic plan, or managerial
responses to declines in demand, increasing costs or other
TNT accounts for all its business combinations under the purchase market factors. Restructuring provisions reflect many
accounting method. The cost of an acquired company is assigned to estimates, including those pertaining to separation costs,
the assets purchased and the liabilities assumed on the basis of consolidation of excess facilities, contract settlements and
their fair values at the date of acquisition. The determination of fair tangible asset impairments. Actual experience has been and
values of assets and liabilities acquired requires TNT to make may continue to be different from these estimates.
estimates and use valuation techniques when market value is not
readily available. Any excess of purchase price over the fair value of
the assets acquired is allocated to goodwill.
Accrued current liabilities
TNT also has to estimate the deferred revenues from stamps
In determining impairments of intangible assets, tangible fixed sold but not yet used by its customers. The company uses a
assets and goodwill, management must make significant seasonal model based on historical figures in order to account
judgements and estimates to determine whether the cash flows for the seasonal effects in sales from stamps (for example, sales
73
generated by those assets are less than their carrying value. for Christmas greetings in November and December). Growth through networks
Determining cash flows requires the use of judgements and Annual report 2007
estimates that have been included in TNT’s strategic plans and
long-range forecasts. The data necessary for the execution of
Income taxes CHAPTER 8
Financial
the impairment tests are based on management estimates of future The company is subject to income taxes in numerous Statements
cash flows, which require estimating revenue growth rates jurisdictions. Significant judgement is required in determining
and profit margins. the worldwide provision and liability for income taxes.
 There are many transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary
Contingent liabilities
course of business. TNT recognises liabilities for tax issues Legal proceedings covering a range of matters are pending in
based on estimates of whether additional taxes will be due, various jurisdictions against the company. Due to the
based on its best interpretation of the relevant tax laws. uncertainty inherent in such matters, it is often difficult to
Where the final tax outcome of these matters is different from predict the final outcome. The cases and claims against the
the amounts that were initially recorded, such differences will company often raise difficult and complex factual and legal
impact the income tax and deferred tax provisions in the period issues which are subject to many uncertainties and
in which such determination is made. complexities, including but not limited to the facts and
circumstances of each particular case and claim, the jurisdiction
TNT recognises deferred tax assets to the extent that it is and the differences in applicable law. In the normal course of
probable that future taxable profits will allow the deferred tax business, TNT consults with legal counsel and certain other
asset to be recovered. This is based on estimates of taxable experts on matters related to litigations.
income by jurisdiction in which the company operates and the
period over which deferred tax assets are recoverable. In the TNT accrues a liability when it is determined that an adverse
event that actual results differ from these estimates in future outcome is probable and the amount of the loss can be
periods, and depending on the tax strategies that the company reasonably estimated. In the event an adverse outcome is
may be able to implement, changes to the recognition of possible or an estimate is not determinable, the matter is
deferred tax assets could be required, which could impact disclosed.
TNT’s financial position and net profit.

Accounting for
discontinued operations
Accounting for discontinued operations requires the use of
significant assumptions and estimates, such as the assumptions
used in the fair value calculations as well as the estimated
costs to sell.

74
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
Notes to the consolidated
balance sheets
1 Intangible assets: 2,119 million (2006: 1,785)

Other
Statement of changes in intangible assets Goodwill Software intangibles Total
Amortisation percentage 10%- 35% 0%- 35%

Historical cost 2,139 335 103 2,577

Accumulated amortisation and impairments (513) (207) (19) (739)

Balance at 31 December 2005 1,626 128 84 1,838

Changes in 2006
Additions 99 83 20 202
Disposals (9) (1) (10)
(De)consolidation 31 31
Transfers to assets held for sale (144) (3) (68) (215)
Internal transfers/reclassifications 11 (11) 0
Amortisation and impairments (1) (57) (5) (63)
Exchange rate differences 2 2

Total changes (53) 33 (33) (53)

Historical cost 2,086 402 58 2,546

Accumulated amortisation and impairments (513) (241) (7) (761)

Balance at 31 December 2006 1,573 161 51 1,785

Changes in 2007
Additions 256 72 25 353
Disposals (2) (2)
(De)consolidation 3 3 56 62
Internal transfers/reclassifications 22 (22) 0
Amortisation and impairments (56) (17) (73)
Exchange rate differences (2) (4) (6)

Total changes 255 37 42 334

Historical cost 2,338 463 118 2,919

Accumulated amortisation and impairments (510) (265) (25) (800)

Balance at 31 December 2007 1,828 198 93 2,119

(in € millions, except percentages)

75
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 Goodwill is not amortised but is subject to an annual TNT determined the budgeted gross margin based on past
impairment review. performance and its expectations for market development.
The weighted average growth rates used are consistent with
For impairment review purposes, all goodwill, including goodwill the forecasts included in industry reports. The discount rates
generated from the acquisition of TNT and GD Express used in the CGUs valuations vary from 10% to 11% (pre-tax) to
Worldwide, is allocated to the applicable cash generating units reflect specific risks relating to the relevant divisions.
(CGUs), based on the revenue as at the date of acquisition. Of the
total goodwill balance of €1,828 million, TNT has allocated The software balance includes internally generated software
€1,248 million to the Express Europe CGU, €216 million to the with a book value of €153 million at 31 December 2007
combined European Mail Networks CGUs, €280 million to other (2006: 121). Of the additions in software, €52 million related
Express CGUs, €49 million to Other networks CGU and €35 to self produced software and €20 million related to purchased
million to other Mail CGUs. The recoverable amount of a CGU is software. Other intangible assets relate to customer lists of
in principle determined based on value in use calculations by using €76 million (2006: 35) and software under construction of
the discounted cash flow model. These calculations use cash flow €17 million (2006: 16).
projections based on financial budgets approved by management
covering a period of 9 years. TNT’s management has The estimated amortisation expenses for software and other
demonstrated that its cash flow projections have been reliable in intangibles for the subsequent five years are 2008: €55 million,
the past. For the cash flow projections the key assumptions relate 2009: €59 million, 2010: €48 million, 2011: €34 million, 2012:
to revenues, operating income and capital expenditure. The value €66 million and after 2012: €29 million. TNT does not conduct
beyond the explicit forecast period is calculated assuming a fundamental research and development; therefore, it does not
constant cash flow as from the final year (0% growth). The incur fundamental research and development costs.
recoverable value of the more recent acquisitions is the fair value
less cost to sell, which is derived from recent market The intangible assets transferred to assets held for sale of
transactions. The addition in goodwill of €256 million in 2007 €215 million in 2006 relate to the discontinued freight
compared to 2006 is due to acquisitions, see note 28. management business.

76
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 2 Property, plant and equipment: 1,785 million (2006: 1,678)

Statement of changes in property, Land and Plant and Construction

plant and equipment buildings equipment Aircraft Other in progress Total
Depreciation percentage 0%-10% 4%-33% 4%-10% 7%-25% 0%

Historical cost 1,360 933 375 584 44 3,296

Accumulated depreciation and
impairments (555) (620) (154) (415) (1,744)

Balance at 31 December 2005 805 313 221 169 44 1,552

Changes in 2006
Capital expenditure 43 75 111 70 118 417
Acquisitions 2 4 2 8
Disposals (12) (6) (3) (6) (27)
Exchange rate differences 3 (1) 2 4
Depreciation and impairments (59) (92) (25) (79) (255)
Transfers to assets held for sale (13) (8) (21)
Transfers and reclassifications 54 49 14 (117) 0

Total changes 18 29 85 (7) 1 126

Historical cost 1,385 877 477 500 45 3,284

Accumulated depreciation and
impairments (562) (535) (171) (338) (1,606)

Balance at 31 December 2006 823 342 306 162 45 1,678

Changes in 2007
Capital expenditure 70 57 120 59 84 390
Acquisitions 1 40 1 2 44
Disposals (8) (3) (3) (14)
Exchange rate differences (19) (7) (7) (2) (35)
Depreciation and impairments (62) (105) (32) (77) (276)
Transfers to assets held for sale (2) (2)
Transfers and reclassifications 44 25 23 (92) 0

Total changes 24 7 81 1 (6) 107

Historical cost 1,459 1,074 592 633 39 3,797

Accumulated depreciation and
impairments (612) (725) (205) (470) (2,012)

Balance at 31 December 2007 847 349 387 163 39 1,785

(in € millions, except percentages)

77
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 Aircraft and (spare) engines are depreciated on a straight-line life of the associated aircraft or engine type. All 47 aircrafts
basis over the shorter of the asset’s useful life and the lease (2006: 44) are operated by the Express business.
term to estimated residual values of 20%. Depending on the
type of aircraft, the depreciation term varies from 10 to 25 Finance leases included in the property, plant and equipment
years. Spare parts are depreciated to their estimated residual balance as at 31 December 2007 are:
value on a straight line basis over the remaining estimated useful

Land and Plant and Construction in

buildings equipment Aircraft Other progress Total 2007 Total 2006
Under finance lease 22 18 212 5 257 155
Express 18 16 212 5 251 145
Mail 4 2 6 10
(in € millions)

In May 2007 TNT entered into a 10 year finance lease of fully depreciated property, plant and equipment that is still in
agreement relating to the acquisition of an additional Boeing use is €578 million (2006: 353) of which €240 million (2006:
747-400 ERF. The total capitalised value of the aircraft was 175) is related to plant and equipment, €158 million (2006: 49)
€110 million based upon the present value of the minimum lease is related to land and buildings and €180 million is related to
payments and guaranteed residual value included as part of the other (2006: 129).
transaction. The lease requires semi-annual lease payments of a
base amount of €4 million adjusted by an interest matrix that is In 2007, TNT has been entitled to a grant of €7 million following
linked to TNT’s credit rating at the time of each semi-annual the fulfilment of the conditions of the grant, which related
payment. The lease agreement and related documents do not to the building of a depot in the Express hub in Liege. The grant
include an option for TNT to purchase the aircraft. In 2006 received has been deducted from the historical value of
TNT entered into the first 10 year finance lease agreement the asset resulting in lower depreciation charges in 2007
pertaining to the acquisition of a Boeing 747-400 ERF with a and beyond.
total capitalised value of €110 million. See note 31 for the
relating financial liabilities of the financial leases.

Included in land and buildings under financial lease are lease hold
rights and ground rent. The book value of the lease hold rights
and ground rent in Mail is €4 million (2006: 10), comprising a
historical cost of €7 million (2006: 16), with accumulated
depreciation of €3 million (2006: 6). The book value of the lease
hold rights and ground rent in Express is €18 million (2006: 16),
comprising a historical cost of €25 million (2006: 19) with
accumulated depreciation of €7 million (2006: 3).

Lease hold and ground rents expiring within 1 year amount to

€1 million (2006: 1), lease hold and ground rents between 1 and
5 years amount to €6 million (2006: 3), lease hold and ground
rents between 5 and 20 years amount to €13 million (2006: 16)
and lease hold and ground rents between 20 and 40 years
amount to €1 million (2006:2), lease hold and ground rents
more than 40 years amount to €1 million (2006: 0) and lease
hold and ground rents contracts with indefinite terms amount
to €0 million (2006: 4). Lease hold rights and ground rent for
land and buildings are mainly in Belgium for €10 million (2006:
10), in the Netherlands for €4 million (2006: 10) and in France
for €7 million (2006: 6).

TNT does not hold freehold office buildings for long term
investments and for long term rental income purposes. The
rental income is based upon incidental rental contracts with
third parties for buildings which are temporarily not in use by
TNT or based upon contracts which are supportive to the
78
Growth through networks primary business activities of TNT.
Annual report 2007
Land and buildings of €44 million (2006: 34) are pledged as
CHAPTER 8
Financial security to third parties in Express in Germany.
Statements
There are no material temporarily idle property, plant and
equipment at 31 December 2007 (2006: 0). The historical cost
 3 Financial fixed assets: 325 million (2006: 314)

Statement of changes in financial fixed assets Prepayments and accrued income

Financial Other
Investments Other loans Deferred fixed assets prepayments and
in associates receivable tax assets at fair value accrued income Total
Balance at 31 December 2005 47 13 188 1 24 273

Changes in 2006
Acquisitions/additions 20 1 51 16 1 89
Disposals/decreases (26) (26)
Transfers to assets held for sale (3) (3) (1) (7)
(De)consolidation 2 1 3
Withdrawals/repayments (7) (4) (11)
Exchange rate differences (1) (1)
Other changes (6) (6)

Total changes 11 (6) 23 16 (3) 41

Balance at 31 December 2006 58 7 211 17 21 314

Changes in 2007
Acquisitions/additions 31 82 3 116
Disposals/decreases (7) (88) (95)
Transfers to assets held for sale 0
(De)consolidation 1 1 2
Withdrawals/repayments (2) (13) (4) (19)
Exchange rate differences (3) (3)
Other changes 1 9 10

Total changes 25 (2) (8) (4) 0 11

Balance at 31 December 2007 83 5 203 13 21 325

(in € millions)

Investments in associates investment in Logispring Investment Fund Holding B.V. is the

The goodwill balance included in investments in associates at most significant investment in an associate. TNT accounts for
31 December 2007 is €3 million (2006: 0). The result from this investment using the equity method. Key information
investments in associates at 31 December 2007 amounts to regarding this investment (on a stand alone basis) is as follows
€1 million (2006: -6) and is included in ‘Other changes’. TNT’s and includes balances at 100%:

79
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 Year ended at 31 December 2007 2006 no material write offs relating to inventories occurred.
The balance of inventories that is expected to be recovered
Non-current assets 70 52
after 12 months is €1 million (2006: 1).
Current assets 0 0
5 Accounts receivable: 1,656 million (2006: 1, 561)
Equity 70 52 At 31 December 2007 2006
Non-current liabilities 0 0 Trade accounts receivable — total 1,514 1,380
Current liabilities 0 0 Provision for impairment (62) (61)

Net sales 0 0 Trade accounts receivable — net 1,452 1,319

Operating income 0 0 Vat receivable 34 27
Profit attributable to the Other accounts receivable 170 215
shareholders (3) (5)
Total 1,656 1,561
Net cash from operating activities 0 (0) (in € millions)

Net cash used in

investing activities (20) (16) The fair value of the accounts receivable approximates its
Net cash used in carrying value. Other accounts receivables mainly include
financing activities 20 16 receivables from insurance companies, deposits and various
other items. The balance of accounts receivable that is
Change in cash from
continuing operations 0 0 expected to be recovered after 12 months is €2 million
(2006: 1). The maximum exposure to credit risk at the
(in € millions)
reporting date is the carrying value of each class of receivables
mentioned above. TNT does not hold collaterals as security for
Deferred tax assets the outstanding balances. For the non-trade accounts
Deferred tax assets are further explained in note 23. receivables no provision for impairment is required. The
concentration of the accounts receivable per customer is
Financial assets at fair value limited. The concentration of our accounts receivable portfolio
Financial assets at fair value mainly include TNT’s 3.5% equity over the different regios can be summarised as follows: the
stake in CEVA Investments Ltd. (formerly known as Louis Netherlands €256 million (2006: 255), Rest of Europe
Topco Limited), for an amount of €11 million (2006: 15.5), €965 million (2006: 872), Asia €118 million (2006: 98),
which TNT obtained as part of the sale of its logistics division and America’s and rest of the world €113 million (2006: 94),
as at 4 November 2006. see note 35.

During Q1 of 2007 TNT received €13 million of dividends As of 31 December 2007, the total trade accounts receivable
relating to this investment. In addition TNT re-measured the amounted to €1,514 million of which €828 million was past due
fair value to €11 million based on an offer received to sell its date but not individually impaired (2006: 561). The total
stake. The fair value through profit and loss amounted to provision for impairment amounts to €62 million (2006: 61) of
€9 million and is recorded in interest income and expenses, which €35 million (2006: 37) relates to trade accounts
see note 22. As these are non-listed securities, day-to-day receivable that were individually impaired for the notional
market prices of the underlying share are not available. amount. The remainder of the provision relates to a collective
loss component established for groups of similar trade accounts
As per 31 December 2006 the financial assets at fair value also receivable balances in respect to losses that have been incurred
included the fair value of a US$139 million interest rate swap of but not yet identified as such for trade accounts receivable. This
€1 million (2007: -2). For further disclosure on this swap, see collective loss component is largely based on the ageing of the
note 31. trade receivables and reviewed periodically.

4 Inventory: 30 million (2006: 29) The ageing analysis of the trade accounts receivable past due
At 31 December 2007 2006 but not individually impaired is presented below:
Raw materials and supplies 10 9
At 31 December 2007 2006
Finished goods 20 20
Up to 3 months 748 509
3-6 months 45 31
Total 30 29
Over 6 months 35 21
(in € millions)
80
Growth through networks
Annual report 2007 Total inventory of €30 million (2006: 29) is valued at historical Total 828 561
cost for an amount of €35 million (2006: 35) and is stated net of (in € millions)
CHAPTER 8
Financial provisions for obsolete items amounting to €5 million (2006: 6).
Statements There are inventories carried at net realisable value for an
amount of €1 million (2006: 0) and no inventories are pledged as
security for liabilities as at 31 December 2007. In 2007,
The movements in the provision for impairment of trade 8 Assets held for sale: 10 million (2006: 409)
accounts receivables are as follows: Liabilities related to assets classified
as held for sale: 0 million (2006: 146)
At 31 December 2007 2006 The assets held for sale as at 31 December 2007 amount to
€10 million and relate to buildings held for sale.
Balance at 1 January 61 58
Provided for during financial year 18 19 The assets and liabilities as at 31 December 2006 related to
Receivables written off the decision taken to divest the freight management business
during year as uncollectable (13) (13) following the strategy to focus on TNT’s core competency.
Unused amounts reversed (4) (3) On 16 November 2006, TNT signed a Sale and Purchase
Agreement to sell its freight management business to the
French logistics service provider Geodis SA. On 5 February
Balance at 31 December 62 61 2007, the sale was completed. The total transaction value was
(in € millions) €483 million on a cash and debt free basis. Taking into account
various deal related costs and deductions, the net proceeds
amounted to €468 million resulting in a book gain of
6 Prepayments and accrued €206 million.
income: 236 million (2006: 227)
Prepayments and accrued income include amounts paid in The income from discontinued operations in 2007 amounting
advance to cover costs that will be charged against income in to €206 million represents the profit on the sale of TNT’s
future years and net revenues not yet invoiced. At 31 December discontinued freight management operations. The operating
2007, prepayments amounted to €79 million (2006: 70). The result of the discontinued freight management operations for
balance of prepayments and accrued income that is expected to the period 1 January 2007 up to and including 4 February 2007
be recovered after 12 months is €4 million (2006: 0). amounted to zero.

Prepayments and accrued income also include outstanding The loss from discontinued operations in 2006 amounting
short term foreign exchange forward contracts for an amount to €157 million largely relates to the discontinued logistics
of €4 million (2006: 3) and forward interest rate swaps for an operations. The sale of the discontinued logistics operations
amount of €1 million (2006: 0). The fair value of these financial was completed on 4 November 2006.
instruments has been calculated at the relevant market
(forward) rates at 31 December 2007. The notional principal 9 Equity: 1,951 million (2006: 2,008)
amount of the outstanding foreign exchange forward contracts Equity consists of equity attributable to the equity holders of
is €461 million at 31 December 2007 (2006: 282). The notional the parent of €1,931 million (2006: 1,983) and minority interest
principal amount of the forward swaps is €400 million at 31 of €20 million (2006: 25). Equity attributable to the holders of
December 2007 (2006: 600). See note 31. the parent consists of the following items:

7 Cash and cash equivalents: Issued Share Capital

295 million (2006: 297) Issued share capital amounted to €182 million at 31 December
Cash and cash equivalents comprise cash at bank and in hand of 2007 (2006: 203). The number of authorised, issued and
€169 million (2006: 234) and short term bank deposits of €126 outstanding shares by class of share is as follows:
million (2006: 63). The effective interest rate during 2007 on
short term bank deposits was 4% (2006: 3%) and the average
outstanding amount was €77 million with an average maturity
of 1.6 days. Included in cash and cash equivalents is €41 million
(2006: 74) of restricted cash. The fair value of cash and cash
equivalents approximates the carrying value.

At 31 December 2007 2006

Authorised 1,600,000,000 1,800,000,000
Ordinary shares 800,000,000 900,000,000
Preference B 800,000,000 899,999,999
Special share 0 1
Issued and outstanding 379,224,255 422,767,601
Ordinary shares 379,224,255 422,767,600
81
of which held by the company to cover share plans 1,716,060 2,884,441 Growth through networks
Annual report 2007
of which held by the company for cancellation 6,977,275 27,640,543
CHAPTER 8
Preference B 0 0 Financial
Special share 0 1 Statements

of which held by the company for cancellation 0 1

 Authorised share capital Preference shares
By deed of 27 April 2007 the articles of association were Stichting Bescherming TNT (Foundation Protection TNT or the
amended. As of that date the company’s authorised share capital Foundation) was formed to care for TNT’s interests, the
amounts to €768 million, divided into 800,000,000 ordinary enterprises connected with TNT and all interested parties, such
shares and 800,000,000 preference shares B of €0.48 nominal as shareholders and employees, by, among other things,
value each. Prior to the amendment, the authorised share capital preventing as much as possible influences which would threaten
amounted to €864 million and was divided into 900,000,000 TNT’s continuity, independence and identity contrary to such
ordinary shares, 1 special share and 899,999,999 preference interests. The Foundation is an independent legal entity and is not
shares B of €0.48 nominal value each. owned or controlled by any other legal person.

Form of shares TNT’s articles of association provide for protective preference

The ordinary shares are in bearer or in registered form. Ordinary shares B that can be issued to the Foundation to serve these
shares in bearer form are represented by a global note held by the interests. There are currently no preference shares B issued,
Dutch clearing system Euroclear Netherlands (formerly known as although the Foundation has a call option to acquire a number of
NECIGEF) and are transferable through Euroclear Netherlands’ preference shares B not exceeding the total issued amount
book entry system. ADRs represent ordinary shares in bearer form of shares minus one and minus any shares already issued to
represented by the note held by Euroclear Netherlands. Ordinary the Foundation.
shares in registered form are transferred by means of a deed of
transfer and TNT’s written acknowledgement of the transfer. TNT TNT and the Foundation have entered into the call option
does not have share certificates for ordinary shares represented by agreement to prevent, delay or complicate unsolicited influence
the global note. The preference shares B are in registered form. of shareholders, including an unsolicited take-over or
concentration of power. The issue of preference shares B enables
Repurchase of shares to cover share plans TNT to consider its position in the then-existing circumstances.
In 2007, the company purchased no ordinary shares The preference shares B will be outstanding no longer than
(2006: 2.700.000) to cover its obligations under the existing strictly necessary. Once the reason for the placing of the
management option plans and share grants. At 31 December 2007 preference shares B no longer exists, TNT shall propose to the
the total number of shares held for this purpose was 1,716,060 general meeting of shareholders to cancel the preference shares
(2006: 2,884,441). TNT shares held by the company are not B entirely as a class.
entitled to receive dividends nor have voting rights.
At the annual general meeting of shareholders held on 20 April
Repurchase of shares / reduction of the issued share 2007, the shareholders rejected the proposal to extend the
capital by cancellation of shares then-current authority of the Board of Management to issue
Under the €1,000 million share buy-back programme announced preference shares B for another period of eighteen months. This
on 6 November 2006, TNT purchased 27,640,543 ordinary authority enabled the Board of Management to initiate a placement
shares in 2006 and 3,307,164 ordinary shares in January 2007. of preference shares B with the Foundation following the put option
On 20 April 2007 the annual general meeting of shareholders agreement. As from 20 October 2007 the Board of Management
resolved to cancel the total number of 30,947,707 ordinary was no longer entitled to initiate such placement. After careful
shares purchased under this programme. The cancellation of consideration, it was agreed by TNT and the Foundation to
these shares became effective as of 5 July 2007. terminate the put option agreement as of 15 February 2008.

The company announced a further buy-back programme of TNT has granted to the Foundation the right to file an application
€400 million on 26 February 2007. In total 12,595,639 ordinary for an inquiry into the policy and conduct of business of TNT with
shares were repurchased under this programme during 2007. the Enterprise Chamber of the Amsterdam Court of Appeal
The annual general meeting of shareholders held on 20 April (Ondernemingskamer). TNT believes that this may be a useful
2007 had also resolved to cancel the shares purchased under this option in the period before the issuance of preference shares B,
programme, and the cancellation of these shares became without causing a dilution of the rights of other shareholders at
effective on 29 November 2007. that stage.

In 2007, the total number of issued and outstanding ordinary Additional paid in capital
shares decreased by 43,543,346. At a nominal value of €0.48 per Additional paid in capital of €982 million (2006: 1,245) is exempt
share, the cancellation equals an amount of €20.9 million. for Dutch tax purposes.

On 30 July 2007 TNT announced a new share repurchase Translation reserve

programme of up to €500 million. A first tranche of €200 million In 2007 the cumulative translation reserve decreased from
was commenced on 9 November 2007. As a result of these -€5 million in 2006 to -€82 million in 2007. An amount of
repurchases, the company held 6,977,275 ordinary shares for -€81 million (2006: -1) is the movement in exchange differences
cancellation at 31 December 2007 (2006: 27,640,543). on converting foreign subsidiaries of TNT N.V. into euros. These
differences are charged or credited to the translation reserve, net
Special share of taxation. In 2007, an amount of €4 million was released from
82
Growth through networks On 17 November 2006, the State of the Netherlands equity and charged to income related to the divestment of the
Annual report 2007 transferred its special share in the company for free to TNT. freight management business. In 2006 the portion of TNT’s
On 20 April 2007 the annual general meeting of shareholders translation reserve that related to the divested logistics business
CHAPTER 8
Financial resolved to convert the special share into an ordinary share as was released from equity and charged to income.
Statements part of an amendment to the articles of association of TNT. As a
result the special share ceased to exist on 27 April 2007, the date The translation reserve is a legal reserve, which cannot be
on which the amendment to the articles became effective. distributed to the equity holders of the company.
Hedge reserves collective labour agreement and staff with a personal labour
Movements on cash flow hedges amounted to -€1 million agreement who joined the company as from 2007 in the
(2006:-9) resulting from the fair value movement on the Netherlands. The majority of all TNT’s Dutch employees are
€1,000 million forward starting swaps and the US$441 million subject to the collective labour agreement. The plan covers
of forward starting interest swaps, net of taxes. The net cash around 93,000 participants including approximately 13,000
payments relating to the unwinding of these swaps will be pensioners and around 36,000 former employees. By Dutch law
recycled from equity to the income statement based on the the plan is carried out by a separate legal entity and is managed
duration of the underlying hedged items. During 2007, by an independent board that falls under the supervision of
€600 million and $154 million of forward starting swaps were “De Nederlandsche Bank” (DNB).
unwound with a relating recycling of the recorded fair value
adjustment to the income statement. In 2007, €1 million of fair The transitional pension plan consist of the early retirement
value adjustment has been recycled to the income statement scheme and additional arrangements which have been agreed
due to ineffective hedging. For further information on the between the company and the employees following the revised
interest rate swaps, see note 31. fiscal regulations applying to Dutch pension plans in 2006.

The hedge reserve is a legal reserve, which cannot be In the main plan only the employer contributes to the fund.
distributed to the equity holders of the company. The level of contribution is based upon actuarial
recommendations. The total contribution to the main pension
Other Reserves fund amounted to €91 million (2006: 87) and is estimated to
The other reserves are nil (2006: 0). be €90 million in 2008. The contribution for the transitional
plans amounted to €103 million (2006: 107) and is estimated
The appropriation of net income from 2006 which is at €97 million for 2008.
added to the other reserves in 2007 amounts to
€378 million (2006: 386). The main fund runs an actively managed investment portfolio.
The main fund uses asset and liability management studies that
In 2007, TNT increased its other reserves representing the generate future scenarios to determine its optimal asset mix.
fair value of share based transactions to an amount of During 2007, the dynamic weight of equity investments
€14 million (2006: 13). decreased to 42.1%, the dynamic weight of fixed interest
investments increased to 38.1% and the weight of real estate
The “other” movement of €31 million (2006: 54) includes the and alternative investments increased to 19.8%. The plan assets
proceeds obtained from the share grants of 2007 and 2006 may from time to time include investment in TNT’s own
and exercise rights of option plans of prior years. financial instruments through indirect holdings by mutual funds.
However, these indirect holdings are an immaterial share of the
Retained earnings total plan assets. The plan assets do not include property
The profit for 2007 has been calculated as the 2007 net income occupied by or other assets used by TNT.
of TNT N.V. and all its subsidiaries. The 2007 unappropriated
component is €871 million (2006: 561), containing the net profit Derivatives of equity and debt instruments (e.g. swaps) may be
of €986 million (2006: 670) and the paid interim dividend 2007 used to realise changes in investment portfolio, to hedge against
of €115 million (2006: 109). The Board of Management has unfavourable market developments or to adjust the matching of
determined to add €670 million (2006: 378) to other reserves assets and liabilities.
and to put €201 million (2006: 183) as final dividend at the
disposal of the general meeting of shareholders. The pension benefit obligation of TNT’s main plan and
transitional plan covers approximately 94.9% of the group
10 Pension assets: 594 million (2006: 500) pension obligation for post-employment benefits and the
and provisions for pension liabilities: plan assets cover approximately 93.1% of the group pension
437 million (2006: 523) plan assets. The return on the group plan assets was 2.4%
TNT operates a number of pension plans around the world. (2006: 8.5%).
Most of TNT’s non-Dutch pension plans are defined
contribution plans. For TNT’s non-Dutch employees, the
company also operates other post-employment benefit plans
and defined benefit plans, for which the liabilities are separately
covered by private insurers and foreign pension funds.

TNT’s main Dutch company pension plan (main plan), which

is externally funded in “Stichting Pensioenfonds TNT”
(main fund), covers the employees who are subject to TNT’s

Actual mix Strategic mix

At 31 December 2007 2006 20087 2007
83
Equities 42.1% 48.4% 45% 45% Growth through networks
Annual report 2007
Fixed interest and Inflation linked Bonds 38.1% 37.9% 40% 40%
CHAPTER 8
Real estate and alternative investment 19.8% 13.2% 15% 15% Financial
Cash 0.5% Statements

Total 100.0% 100.0% 100% 100%

 Average since
Historical returns 2007 plan inception
Equities 4.8% 8.8%
Fixed interest and Inflation linked Bonds 1.2% 7.0%
Real estate and alternative investment 12.8% 7.8%
Swaps 1 -2.1% -0.6%
Total 2.4% 7.9%
1 – In order to mitigate de duration-mismatch between the TNT Group plan and the pension defined
benefit obligations, interest swaps have been entered into as from as 2006.

Pension costs recognised in the statements of income

Inherent to the valuation of TNT’s pension and the
determination of its pension cost are key assumptions which
include: employee turnover, mortality rates and retirement
ages, discount rates, expected long term returns on plan assets,
pension increases and future wage increases, which are usually
updated on an annual basis at the beginning of each financial
year. Actual circumstances may vary from these assumptions
giving rise to a different pension liability, which would be
reflected as an additional profit or expense in TNT’s statement
of income, in the next year.

In 2007, TNT’s expense for post-employment benefit plans was

€45 million (2006: 120). Total cash contributions for pensions in
2007 amounted to €212 million (2006: 243) and are expected to
amount to approximately €202 million in 2008.

Balance at
Statement of changes in Balance at Employer Contributions/ 31 December
net pension asset/(liability) 1 January 2007 pension expense Other 2007
Provision for pension liabilities 36 (41) 212 207
of which main pension plan in the Netherlands 452 (7) 91 536
of which transitional plan in the Netherlands (459) (31) 103 (387)
of which other pension plan 43 (3) 18 58
Other post-employment benefit plans (59) (4) 13 (50)
Total post-employment benefit plans (23) (45) 225 157
(in € millions)

As of 2007, the company has revised the presentation of the

pension positions of TNT’s various defined benefit schemes
which more fairly represent TNT’s balance sheet position.
On the balance sheet, the pension assets and pension liabilities
of the various schemes have been presented separately,
resulting in a pension asset of €594 million (2006: 500) and a
pension liability of €437 million (2006: 523). Consequently, the
company has adjusted its comparative numbers in the balance
sheet. This revised presentation has no impact on TNT’s equity
or net profit.

The funded status of TNT’s pension plans at 31 December 2007

and 2006 and the employer pension expense for 2007 and 2006
is presented in the table below.
84
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
Pension disclosures 2007 2006
Change in benefit obligation
Benefit obligation at beginning of year (5,373) (5,398)
Transfer to discontinued businesses 3
Service costs (139) (171)
Interest costs (255) (237)
Other movements (3)
Amendments/foreign currency effects 2 4
Curtailments/settlements 1 12
Actuarial (loss)/gain 762 221
Benefits paid 197 196

Benefit obligation at end of year (4,805) (5,373)

Change in plan assets

Fair value of plan assets at beginning of year 4,668 4,216
Actual return on plan assets 104 405
Contributions 212 243
Benefits paid (197) (196)

Fair value of plan assets at end of year 4,787 4,668

Funded status as per 31 December

Funded status (18) (705)
Unrecognised net actuarial loss 217 732
Unrecognised prior service costs 8 9

Pension liabilities 207 36

Other employee benefit plans (50) (59)

Net pension asset/(liability) 157 (23)

Components of employer pension expense

Service costs (139) (171)
Interest costs (255) (237)
Expected return on plan assets 373 346
Amortisation of actuarial loss (20) (58)
Curtailment gain 1 11
Other costs (1) (2)

Employer pension expense (41) (111)

Other post employment benefit plan expenses (4) (9)

Total post employment benefit expenses (45) (120)

85
Weighted average assumptions as at 31 December Growth through networks
Annual report 2007
Discount rate 5.7% 4.7%
CHAPTER 8
Expected return on plan assets 7.9% 7.9% Financial
Statements
Rate of compensation increase 2.0% 2.0%
Rate of benefit increase 2.0% 2.0%
(in € millions, except percentages)
 TNT’s pension costs are affected by the discount rate used to The amounts recognised in the balance sheet are determined
measure pension obligations and the expected long-term rate as follows:
of return on plan assets. Management reviews these and other
assumptions every year. Measurement date for TNT’s At 31 December 2007 2006
post-employment benefits is 31 December. Changes in
Present value of funded
assumptions may occur as a result of economic and market
benefit obligations (4,175) (4,551)
conditions. The impact of changes on the annual pension
expense can be found in the table ‘change in assumptions’ Fair value of plan assets 4,787 4,668
hereafter. If actual results differ from those assumed, this will
generate actuarial gains or losses. These are amortised over (Un)Funded status 612 117
the remaining average service lives of employees if they
exceed the 10%-corridor. Present value of unfunded
benefit obligations (630) (822)
The discount rate is based on the long-term yield on high quality Unrecognised liability 225 741
corporate bonds, including a correction for the duration- Other employee benefit plans (50) (59)
mismatch based on the yield curve used by Dutch pension funds
as published by DNB. The duration of the available corporate
bonds index (AA 10+) is around 12 years. The duration of the Net pension asset/(liability) 157 (23)
pension liabilities is around 18 years. The yield on these bonds is of which included in
corrected for this duration-mismatch. pension assets 594 500
of which included in provisions
Management considers various factors to determine for pension liabilities (437) (523)
the expected return on plan assets. The expected return (in € millions)
is based on the current long-term rates of return on bonds
and applies to these rates a suitable risk premium for the
different asset components. The premium is based on the The table below shows the sensitivity of the employer pension
plan’s asset mix, historical market returns and current expense to deviations in assumptions.
market expectation.
Change in
Returns are linked to the strategic objective of the Stichting employer
Pensioenfonds TNT, as annually reported in the Asset Liability %-change in pension
Management study of this main fund. This main fund controls Change in assumptions assumptions expense
93.1% of the group plan assets. Ultimately the long-term Employer pension expense (41)
objective is to protect the assets from erosion of purchase Discount rate + 0.5% 56
power, and to provide long-term growth of capital without
Expected return on plan assets + 0.5% 23
excessive exposure to risk. The duration of the plan liabilities
determines the investment strategy. The assets are managed by Rate of compensation increase + 0.5% (88)
external investment managers. Active management strategies Rate of benefit increase + 0.5% (83)
are utilised in an effort to realize investment returns in excess
of market indices. This programme provides a reasonable
expectation that returns can be achieved that exceed indexed Employer pension expense (41)
funds. The main fund establishes the investment policy and Discount rate (0.5)% (86)
strategy, including the selection of investment managers, setting Expected return on plan assets (0.5)% (23)
long term strategic targets and monitoring. The strategic asset
mix is a target and not a limitation. The fund may approve Rate of compensation increase (0.5)% 56
components of the asset mix above or below targeted range. Rate of benefit increase (0.5)% 53
The fund may decide to rebalance or change the asset (in € millions, except percentages)
mix periodically.

Assumptions regarding future mortality are based on advice,

published statistics and experience per country. The majority of
the defined benefit obligation relates to participants in the
Netherlands. In the Netherlands, the average life expectancy of
men after retiring at the age of 65 is 18.0 years (2006: 16.9). The
equivalent expectancy for women is 21.0 years (2006: 21.3). The
applied mortality rates derived from the mortality table “GBM/
GBV 2006-2011 with age corrections -1/-1 (male/female).”

Funded status defined benefit plans

86
Growth through networks The table below reconciles the opening and closing balances
Annual report 2007 of the present value of the defined benefit obligation and the
fair value of plan assets for the other defined benefit pension
CHAPTER 8
Financial plans. Included in the provision for pension liabilities are
Statements other employee benefits for the unfunded defined benefit
Trattamento di Fine Rapporto (“TFR”) in Italy
of €50 million (2006: 59).
The table below shows the defined benefit obligation, fair value
of plan assets and experience adjustments thereon for the
current annual period and previous four annual periods. The
experience adjustment is the difference between the expected
and actual position at the end of the year. The experience
adjustment of the defined benefit obligation can not be reliably
determined for the period 2003-2005.

At 31 December 2007 2006 2005 2004 2003

Funded and Unfunded Defined benefit obligation (4,805) (5,373) (5,398) (4,887) (3,727)
Experience adjustment gain/(loss) 0.9% -0.4%

Fair value of plan assets 4,787 4,668 4,216 3,693 3,277

Experience adjustment gain/(loss) -5.4% 1.2% 4.7% 0.4% 2.3%

(Un)Funded status (18) (705) (1,182) (1,194) (450)

(in € millions, except percentages)

The table below shows the expected future benefits per year 11 O ther employee benefits: 55 million (2006: 57)
for pension funds related to TNT’s plans for the coming five Other employee
years. The benefits include all expected payments by the fund or benefit obligations
TNT to the pensioners, including the Dutch transitional plan.
Balance at 31 December 2006 57
Exchange differences
Expected benefits as
Year per 31 December 2007 Additions 10
2008 191 Withdrawals (7)
2009 205 Other
2010 222 Total changes 3
2011 232
2012 237 Balance at 31 December 2007 60
(in € millions) of which included in other
employee benefit obligations 55
Amounts expensed in the consolidated statements of income of which included in
related to defined contribution plans were €36 million short term provisions 5
(2006: 35). (in € millions)

Other employee benefits consist of provisions related to

jubilee payments for €34 million (2006: 32), long-service
benefits for €13 million (2006: 14), long term disability benefits
for €1 million (2006: 2) and other employee benefits for
€12 million (2006: 9).

Short term employee benefits, such as salaries, profit sharing

and bonuses are discussed in note 19.

87
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 12 Other provisions: 145 million (2006: 106)

Claims and
Statement of changes in other provisions Restructuring indemnities Other Total
Balance at 31 December 2006 45 116 32 193
of which included in other provisions (non-current) 26 58 22 106
of which included in short term provisions 19 58 10 87

Changes in 2007
Additions 113 20 40 173
Withdrawals (13) (47) (17) (77)
Exchange rate differences (1) (2) (3)
(De)consolidation 1 29 30
Interest 1 1
Reclassification (1) 8 (7)
Other/releases (3) (8) (4) (15)

Total changes 96 (27) 40 109

Balance at 31 December 2007 141 89 72 302

of which included in other provisions (non-current) 86 12 47 145
of which included in short term provisions 55 77 25 157
(in € millions)

As per 31 December 2007 the provisions for restructuring prejudice the company’s position with respect to these
relate to employee related restructuring projects in the Mail indemnities and disputes.
division for an amount of €140 million (2006: 41) and the
Express division for an amount of €1 million (2006: 4). The Other provisions consist mainly of onerous contracts and
addition to the restructuring provision of €113 million mainly dilapidation provisions. In 2007 the addition to the other
relates to €110 million for restructuring cost of the efficiency provision of €40 million includes an amount of €23 million for
projects that the Mail division will start in 2008 to standardise the cost of downsizing and transferring the company’s onerous
the collection, preparation, and delivery of mail as far as UK Parcel contract, underlying relating operations of TNT’s
possible. After coordinating with the trade unions and works Mail division, to Parcelnet Ltd. This provision is of short
councils, TNT has decided that the employees who are subject term nature.
to these efficiency matters can make use of the provision of the
collective mobility agreement. This social plan comprises a wide The increase of the total provisions due to consolidation effects
range of measures making it possible to carry out the planned of €30 million is mainly due to the consolidation of the acquired
reduction in the number of employees in a social responsible group company Expresso Mercúrio S.A. (€28 million) in 2007.
manner. This provision is discounted at 7% as this provision is
expected to be utilised during the period 2008-2010. The estimated utilisation in 2008 is €157 million, in 2009
€49 million, in 2010 €38 million and in 2011 and
During 2007 withdrawals from the restructuring provision beyond €58 million.
amounted to €13 million. These withdrawals mainly relate to
payments of €4 million to approximately 176 employees
(2006: 528) which were made redundant in 2007 of which
55 employees related to Express (2006: 376) and 121 to Mail
(2006: 152). In addition, €9 million has been used for part of
the approximate 2,500 employees that have voluntarily left
the company.

Provisions for claims and indemnities include provisions for

88
Growth through networks claims from third parties with respect to TNT’s ordinary
Annual report 2007 business activities, as well as indemnities and disputes related
to the sale of TNT’s discontinued operations. The withdrawal
CHAPTER 8
Financial of €47 million relates mainly to settlements with customers
Statements largely offset by proceeds from external reinsurance
companies. More detailed information relating to these
provisions is not provided since such information could
13 Long term debt: 1,294 million (2006: 1,183)

At 31 December 2007 2006

Carrying Fair Carrying Fair
Carrying amounts and fair value of long term debt Amount value Amount value
Euro Bonds 1,019 1,078 1,004 1,060
Finance leases 223 220 146 143
Other loans 23 23 14 14
Interest rate swaps 29 29 19 19

Total long term debt 1,294 1,350 1,183 1,236

(in € millions)

In the table above, the fair value of long term interest bearing The table below sets forth the carrying amounts of interest-
debt, net of current portion, has been determined by calculating bearing long term liabilities (including the current portion)
the discounted value of the future cash flows (redemption and during each of the following five years and thereafter:
interest) using the inter-bank zero coupon curve. The carrying
amounts of current portion of long term debt approximate
their fair value.

Euro Finance Other Interest Short term

Total borrowings Bonds leases loans rate swaps bank debt Total
2008 637 18 82 8 46 791
2009 14 18 32
2010 15 1 16
2011 23 1 24
2012 14 1 23 38
Therafter 1,019 157 2 6 1,184

Total borrowings 1,656 241 105 37 46 2,085

of which included in long term debt 1,019 223 23 29 1,294
of which included in other current liabilities 637 18 82 8 46 791
(in € millions)

For underlying details of the financial instruments, Total current borrowings

see note 30 and 31. Other short term debt of €745 million includes the 5.125%
Eurobond for an amount of €637 million that will mature on
5 December 2008. The total nominal value of the Eurobond
14 O ther current liabilities:1,188 million (2006: 731) amounted to €646 million as part of long term debt. As per
31 December 2007 this Eurobond is measured at amortised
At 31 December 2007 2006 cost of €637 million (2006: 646) which includes a positive fair
value adjustment of €8 million. This fair value adjustment of
Short term bank debt 46 41
positive €8 million (2006: 11) is mitigated by the negative
Other short term debt 745 342 €8 million (2006: -11) of fair value on the €500 million
(2006: 500) of interest rate swaps outstanding for which TNT
receives fixed and pays floating interest. These interest rate
Total current borrowings 791 383
swaps act as a hedge against the fair value interest rate risk of
Taxes and social security contributions 204 150 TNT’s 5.125% Eurobond. The interest rate swaps are also part
89
Expenses to be paid 35 29 of other short term debt. Growth through networks
Annual report 2007
Other 158 169
Other short term debt also includes short term bank facilities
CHAPTER 8
of €82 million (2006: 37) and the current portion of outstanding Financial
Total 1,188 731 lease liabilities of €18 million (2006: 12). There are no balances Statements
(in € millions) of 31 December 2007 that are expected to be settled after
12 months (2006: 0).
 As at 31 December 2006 other short term debt also
19 S alaries, pensions and social security
included drawn commercial paper of €287 million and the fair
contributions: 3,608 million (2006: 3,384)
value of a US$154 million forward starting interest rate swap Year ended at 31 December 2007 2006
of €4 million. Salaries 3,071 2,823

Other Share based payments 13 9

Other includes shares repurchased under the share buy-back Pension charges:
program, but not yet settled during 2007 of €3 million (2006: 6) Defined benefit plans 45 120
and the fair value of €9 million (2006 €6) of all outstanding
Defined contribution plans 36 35
short term foreign exchange forward contracts with a nominal
value of €642 million (2006: 621). Social security charges 443 397

15 Accrued current liabilities: Total 3,608 3,384

1,147 million (2006: 1,136) (in € millions)

At 31 December 2007 2006

Amounts received in advance 120 88
The increase in the salaries mainly relates to the increase of
Expenses to be paid 673 731 the labour force and the restructuring costs of €110 million of
Vacation days/vacation payments 173 167 Mail Netherlands.
Terminal dues 68 66
Other accrued current liabilities 113 84
Labour force 2007 2006 1
Employees 2

Total 1,147 1,136

Express 75,032 52,638
(in € millions)
Mail 84,929 84,731
Other networks 1,385 1,422
Amounts received in advance include €50 million (2006: 45)
for stamps which were sold but not yet used. Non-allocated 236 431

An amount of €51 million is expected to be settled after Total at year end 161,582 139,222
12 months (2006: 51).
Employees of joint ventures 3 4,621 6,691
Number of external
Notes to the consolidated agency staff at year end 38,639 38,546

statements of income Full-time equivalents (FTEs) 2

Express 70,271 48,652
16 Net sales: 10,885 million (2006: 9,948) Mail 42,777 42,691
The net sales of Mail, Express and Other networks relate to the Other networks 1,182 1,206
trading activities of these reporting segments, arising from
Non-allocated 229 424
rendering services. Net sales allocated by geographical area in
the country or region in which the entity records sales is
detailed in note 35. Total year average 114,459 92,973
17 O ther operating revenues: FTEs of joint ventures 2,3
4,000 5,368
132 million (2006: 112) 1 – Comparative figures of Express and Other networks are adjusted
2 – Including temporary employees on our payroll.
Other operating revenues relate to the sale of goods and 3 – These numbers represent all employees and FTEs in the joint ventures.
rendering of services not related to TNT’s normal trading
activities and mainly include passenger/ charter revenues
€75 million (2006: 55), customs clearance/ administration At the end of 2007, 4,621 people (2006: 6,691) were employed
revenue €33 million (2006: 16), rental income of temporarily by joint ventures, of whom 2,674 (2006: 4,824) were on the
leased-out property €4 million (2006: 4) and catering services payroll of Dutch companies, primarily Postkantoren B.V. and
€2 million (2006: 6). 1,947 (2006: 1,867) were on the payroll of companies outside
the Netherlands.
18 Other income: 75 million (2006: 65)
Other income in 2007 mainly includes net proceeds from the Apart from the headcount of employees the labour force is also
90
Growth through networks sale of property, plant and equipment for €62 million (2006: 37) expressed in full-time equivalents (FTE’s) based on the hours
Annual report 2007 and the sale of group companies of €3 million (2006: 24) and worked divided by the local standard. In 2007 the average
other income of €10 million (2006: 4). number of FTE’s in the Mail division was 42,777. The expansion
CHAPTER 8
Financial of European Mail Networks mainly in Germany and the UK
Statements resulted in an increase of around 1,240 FTE’s which was partly
offset by the decrease in Mail Netherlands of around 1,135
FTE’s resulting from efficiency initiatives.
The average number of FTE’s in the Express division as at of the Supervisory Board, excluding VAT, amounted to €561,063
31 December 2007 was 70,271 being an increase of 44.4% (2006: 556,000). The remuneration of the individual members of
compared to 2006. This is mainly due to the new acquisitions the Supervisory Board is set out in the table below:
of Hoau and Mercúrio in 2007.

Remuneration of members of the Supervisory Board

Over 2007, the accrued remuneration of the current members

Supervisory Board compensation Base compensation Other payments 1 Total renumeration

J.H.M. Hommen 60,000 23,000 83,000

R.J.N. Abrahamsen 45,000 8,500 53,500
J.M.T. Cochrane 2
25,714 2,000 27,714
R. Dahan 45,000 7,500 52,500
V. Halberstadt 45,000 11,500 56,500
M. Harris 3
22,500 4,500 27,000
G. Kampouri Monnas 45,000 10,000 55,000
R. King 45,000 5,000 50,000
W. Kok 45,000 9,500 54,500
S. Levy 45,000 7,500 52,500
R.W.H. Stomberg 45,000 7,000 52,000

Total 468,214 96,000 564,214

(in €)
1 – P ayments relating to number of Supervisory Board committee meetings attended.
2 – J.M.T. Cochrane resigned on 26 July 2007
3 – M.Harris was appointed on 20 April 2007

No options or shares were granted to members of the Total remuneration

Supervisory Board and none of the members of the Supervisory In 2007, the remuneration, including pension and social
Board accrued any pension rights with the company. security contributions, of the current members of the
Board of Management amounted to €9,198,005 (2006:
Remuneration of members 7,181,572). Included in this amount is an amount of €970,551
of the Board of Management which represents the cost of the waived portion of the granted
In 2007 the total remuneration of the Board of Management performance shares which under IFRS 2 Share-based payment
consisted of: qualify as an accelerated vesting for which the amount
——base salary that otherwise would have been recognised for services
——other periodic paid compensation received over the remainder of the vesting period, is
——variable compensation: recognised immediately.
——accrued short term incentive
——accrued long term incentive The remuneration of the individual members of the Board
——pension of Management is set out in the tables below:
In the paragraphs below the 2007 values of each of these
remuneration elements will be reported per member of the
Board of Management.

Other Accrued Accrued long Total 2007

Remuneration Base periodic paid short term term incentive Pension (excluding
Board of Management salary compensation 1 incentive (excluding waiver) related costs waiver)

Peter Bakker 900,000 119,858 770,876 438,235 125,883 2,354,852

Henk van Dalen 2 600,000 530,227 462,134 128,195 403,324 2,123,880
Harry Koorstra 600,000 107,503 519,891 221,197 117,865 1,566,456
Marie-Christine Lombard 600,000 471,840 511,327 323,099 276,000 2,182,266 91
Growth through networks
Annual report 2007
Total 2,700,000 1,229,428 2,264,228 1,110,726 923,072 8,227,454
CHAPTER 8
(in €) Financial
1 – Includes company costs related to tax and social security, company car and other costs. It also includes annual salary allowances made as compensation for the change in pension Statements
system to Peter Bakker of €56,000; Harry Koorstra of €51,000 and Henk van Dalen of €51,000.
2 – Employed as per 1 April 2006; The other paid compensation include the second instalment of €325,000 of the total compensation of €1,300,000 for the loss of long term incentive
rights at his former employer. The pension related costs include the second instalment of the actuarial value of a total compensation of €1,350,000 to be equally contributed in four
instalments in accordance with the employment agreement of Henk van Dalen.
 Remuneration Total 2007 Waiver of granted Total 2007
Board of Management (excluding waiver) shares 2007 (including waiver) Total 2006

Peter Bakker 2,354,852 358,617 2,713,469 2,177,624

Henk van Dalen 2,123,880 203,978 2,327,858 1,544,919
Harry Koorstra 1,566,456 203,978 1,770,434 1,450,604
Marie-Christine Lombard 2,182,266 203,978 2,386,244 2,008,425

Total 8,227,454 970,551 9,198,005 7,181,572

(in €)

Base salary
Base salary for the members of the Board of Management has
been unchanged since 2004 and amounted to €900,000 for the
CEO and €600,000 for the Board members. To underline its
understanding of the measures requested from employees in
connection with further planned cost reductions at TNT Post
Netherlands, the Board of Management decided not to accept a
proposed 5% increase of the base salary as of 1 January 2007.

Variable compensation
In the table below the total variable compensation in 2007
excluding the waived portion of the granted 2007 performance
shares to the members of the Board of Management is
expressed as a percentage of base salary.

Accrued long term

Percentage variable compensation Accrued short incentive Total variable as % of
Board of Management term incentive (excluding waiver) compensation base pay

Peter Bakker 770,876 438,235 1,209,111 134%

Henk van Dalen 462,134 128,195 590,329 98%
Harry Koorstra 519,891 221,197 741,088 124%
Marie-Christine Lombard 511,327 323,099 834,426 139%

Total 2,264,228 1,110,726 3,374,954

(in €, except percentages)

Accrued short term incentive

Since 2002, TNT accounts for bonus payments on the basis of
the accrued bonuses for the performance of the year reported.
In 2007, an amount of €1,953,000 was paid to the members of
the Board of Management for performance over 2006.

In 2007, both Express and Mail exceeded their economic profit

targets. In 2007 the performance on earnings from continuing
operations also exceeded the set target. The bonus paid out to
the members of the Board is paid out in cash. Under the bonus
matching plan they can invest 25% of the gross bonus amount in
shares, see also below the paragraph “share matching plan”.

In the table below the amount of €2,025,000 reflects the

accrued bonuses for performance over 2007 and the amount of
€239,228 reflects the accrued costs for the rights on matching
92
Growth through networks shares that were granted in 2007, 2006, 2005 and 2004. The
Annual report 2007 costs for the rights on matching shares related to the matching
shares granted in 2007 for the performance over 2006,
CHAPTER 8
Financial amounted for Peter Bakker to €21,668, for Harry Koorstra and
Statements Marie-Christine Lombard €14,445 and for Henk van Dalen
€12,134. The costs are determined by multiplying the number
of matching shares with the share price on the date of grant
corrected for the expected dividend yield during the vesting The 2007 accrued short term incentive amounts for
period and taking into account statistical evidence of the members of the Board of Management are accrued as
non-market conditions which value then subsequently is set out below:
amortised over the vesting period.

Accrued short
term Incentive Accrued for 2007 as % of Accrued for Accrued for short as % of
Board of Management performance 1 base pay matching shares 2 term incentive base pay

Peter Bakker 675,000 75% 95,876 770,876 86%

Henk van Dalen 450,000 75% 12,134 462,134 77%
Harry Koorstra 450,000 75% 69,891 519,891 87%
Marie-Christine Lombard 450,000 75% 61,327 511,327 85%

Total 2,025,000 239,228 2,264,228

(in €, except percentages)
1 – The level of short term incentive is maintained at policy level but the actual pay-out is capped at last years’ level.
2 – Includes costs for matching shares granted in 2007 and previous years.

Share matching plan results. If at least 50% of the shares are retained for a period of three
In 2007, the short term incentive related to the realisation of years, the company will match the amount of these shares on a
targets over 2006 for the Board of Management amounted to one-to-one basis. In compliance with the Dutch corporate governance
€1,953,000 (2006: 1,772,279). This amount (€1,953,000) was code, the members of the Board of Management may not sell their
paid in cash, taking into account applicable taxes and social matching shares before the earlier of five years from the date of grant or
security contributions. Of the net amount received, an amount the end of the employment, although any sale of shares for the purpose
equal to 25% of the gross bonus (€488,250) was used by the of using the proceeds to pay for the tax relating to the grant of these
Board members to purchase TNT-shares. The number of shares is exempted. These bonus shares are held in a trust by TNT’s
purchased shares involved is calculated by dividing the amount share administrator.
invested by the share price on the day of grant. The day of grant
is the day following the announcement of the first quarter The current matching entitlement is set out in the following table:

Bonus-related Number of matching rights on shares Remaining

matching rights Outstanding Granted Vested Forfeited Outstanding years in
Board of Management Year 1 Jan 2007 during 2007 during 2007 during 2007 31 Dec 2007 contractual life

Peter Bakker 2005 8,211 8,211 0.3

2006 4,159 4,159 1.3
2007 5,213 5,213 2.3
Henk van Dalen 2007 2,919 2,919 2.3
Harry Koorstra 2004 2,602 2,602
2005 5,474 5,474 0.3
2006 3,043 3,043 1.3
2007 3,476 3,476 2.3
Marie-Christine Lombard 2005 4,562 4,562 0.3
2006 3,043 3,043 1.3
2007 3,476 3,476 2.3

Total 31,094 15,084 2,602 0 43,576

93
Growth through networks
In 2007, the average price on vesting for matching shares was €32.38. Annual report 2007

CHAPTER 8
Financial
Statements
 Accrued long term incentive
The maximum numbers of options that can vest are disclosed in
this report and amount to 150% of base allocation of share
options for 2004. The maximum number of performance shares
that can vest are disclosed in this report and amount to 120% of
base allocation of performance shares granted in 2004, 2005
and 2006 and to 150% of base allocation of performance shares
granted in 2007. In the table below the total costs of the total
share options and rights on performance shares excluding the
waived portion of the granted 2007 performance shares
granted to the members of the Board of Management are
expressed as a percentage of base salary.

Rights on Accrued long

Accrued long term incentive Share options performance shares term incentive as % of
Board of Management granted in 2004 granted in 2004-2007 1 (excluding waiver) base pay

Peter Bakker 25,810 412,425 438,235 49%

Henk van Dalen 128,195 128,195 21%
Harry Koorstra 12,905 208,292 221,197 37%
Marie-Christine Lombard 12,905 310,194 323,099 54%

Total 51,620 1,059,106 1,110,726

(in €, except percentages)
1 – Excluding the waived portion of the granted shares.

The costs of the granted performance shares in 2007 Based on the total shareholder return vesting percentages,
excluding the waived portion of the granted performance the next table shows the pro forma vesting of the unvested
shares amounted for Peter Bakker to €88,871, for Henk van performance shares, as if the performance period ended at
Dalen, Harry Koorstra and for Marie-Christine Lombard to 31 December 2007.
€46,511. The cost are determined by multiplying the number
of granted performance shares with the fair value of such
shares on the date of grant calculated by using the Monte
Carlo model and taking into account statistical evidence of Performance shares
non-market conditions which value then subsequently is
Pro forma vesting Vesting Vesting
amortised over the vesting period.
according to TSR % of base as per
performance schedules Year 1 allocation 31 Dec 2007
Vesting of the long term incentive
The vesting of the number of share options and the
performance shares depends on the company’s performance Peter Bakker 2005 75% 29,094
on total shareholder return. TNT’s relative total shareholder 2006 75% 20,039
return over the period from 1 January 2005 through 31
December 2007 governs the vesting of performance share 2007 52% 12,922
grant of 2005. TNT’s relative total shareholder return over Henk van Dalen 2006 75% 10,020
the period from 4 May 2006 through 3 May 2009 governs the 2007 52% 6,763
vesting of the performance share grant of 2006. TNT’s relative
Harry Koorstra 2005 75% 14,547
total shareholder return over the period from 4 May 2007
through 3 May 2010 governs the vesting of the performance 2006 75% 10,020
share grant of 2007. 2007 52% 6,763
94
Growth through networks Marie-Christine Lombard 2005 75% 14,547
Annual report 2007
2006 75% 22,520
CHAPTER 8
Financial 2007 52% 6,763
Statements

Total 153,998
1 – For 2005 total shareholder return is fixed, vesting will take place in 2008.

Long term incentive/performance share plan
The table below summarises the status of the rights granted
under the performance share plan to the members of the Board
of Management:

Rights on Number of rights on performance shares Remaining

performance shares Outstanding Granted Vested Forfeited / waived 1 Outstanding years in
Board of Management Year 1 Jan 2007 during 2007 during 2007 during 2007 31 Dec 2007 contractual life

Peter Bakker 2004 10,846 10,846

2005 46,550 17,456 29,094 0.3
2006 32,062 32,062 1.3
2007 62,344 25,069 37,275 2.3
Henk van Dalen 2006 16,032 16,032 1.3
2007 33,767 14,259 19,508 2.3
Harry Koorstra 2004 5,423 5,423
2005 23,275 8,728 14,547 0.3
2006 16,032 16,032 1.3
2007 33,767 14,259 19,508 2.3
Marie-Christine Lombard 2004 5,423 5,423
2005 23,275 8,728 14,547 0.3
2006 36,032 36,032 1.5
2007 33,767 14,259 19,508 2.3

Total 214,950 163,645 21,692 102,758 254,145

1 – For the grant year 2007 these represent the waived portion of the granted rights, respectively Peter Bakker for 25,069 shares and the other board members for 14,259 each.

In 2007 the average price on vesting for performance shares

for the members of the Board of Management was €32.38.

Long term incentive/share option plan

The table below summarises the status of the number of
outstanding options of TNT’s ordinary shares granted to
the Board of Management.

Number of options Amounts in €

Forfeited Share price Remaining
Options Board of Outstanding Exercised during Outstanding 31 Exercise on exercise years in
Management Year 1 Jan 2007 during 2007 2007 Dec 2007 price date contractual life

Peter Bakker 2004 60,000 60,000 18.44 31.37

Harry Koorstra 2004 30,000 30,000 18.44 32.34
Marie-Christine Lombard 2004 30,000 30,000 18.44 4.3

Total current
members 120,000 90,000 30,000
Dave Kulik 2003 9,000 9,000 13.85 33.83
2004 30,000 30,000 18.44 33.82 95
Growth through networks
Annual report 2007
Total former
CHAPTER 8
members 39,000 39,000 Financial
Statements

Total 159,000 129,000 30,000

 Pensions on TNT’s Total Shareholder Return (TSR) performance relative
Peter Bakker, Harry Koorstra and Henk van Dalen are to certain other stock indices. These conditions are included in
participants in a defined benefit scheme, which provides an the calculation of the fair value at grant date. This plan is similar
annual benefit of 70% of pensionable salary, assuming 35 years to the stock option plan as described below with the only
of service. Marie-Christine Lombard participates in a defined difference that the exercise price of performance shares is
contribution pension scheme. The pensionable age of all equal to zero.
members of the Board of Management is 65 years. ——Performance shares were granted in May 2007 to about
773 TNT managers at a fair value of €17.03. These grants
Performance share plan management were part of the policy of granting rights on performance
The performance share scheme is an equity-settled plan with shares each year to eligible members of senior management
annual grants. Participants will be granted a conditional right from 2005 onwards.
over a number of TNT shares. The number of shares comprised ——Shares will become unconditional after the third anniversary
in the share award reflects the position that the participant of the grant.
holds and management’s assessment of their future ——The participant retains the right to be compensated when
contribution to the company. he/she leaves the company for certain reasons (retirement,
certain reorganisations, disability or death).
Participants will become owner of the shares after a period of
three years (vesting period). The plan includes market based The total number of rights on performance shares
vesting conditions such that the number of shares is dependent for management granted in 2007 is stated below.

Number of rights on performance shares

Remaining
Rights on performance Outstanding 1 Granted Vested Forfeited Outstanding years in
shares management Year Jan 2007 during 2007 during 2007 during 2007 31 Dec 2007 contractual life

Management 2005 777,530 25,640 305,885 446,005 0.3

2006 593,608 11,903 49,560 532,145 1.3
2007 1,060,356 298 16,854 1,043,204 2.3

Total 1,371,138 1,060,356 37,841 372,299 2,021,354

In 2007 the average price on vesting for performance shares ——options are granted at the average market price as traded on
for the management was €32.11. the Euronext Amsterdam on the date the grant is made
(2004: €18.44/share),
Option plan management ——for options granted in 2003 and 2004 the option is
No options were granted in 2007. In 2005 the option plan exercisable between the third and eighth anniversary of
was replaced by the performance share scheme. the day of grant; after eight years the outstanding options
are forfeited,
The number of options granted in each of the three years that ——for options granted prior to 2003 the option is exercisable
will ultimately be eligible for exercise is dependent on TNT’s between the third and fifth anniversary of the day of grant;
total shareholder return relative to a peer group of direct after five years the outstanding options are forfeited,
competitors and a peer group of AEX companies. ——the option holder retains the right to exercise his/her
option when he/she leaves the company for certain
Option rights were granted in accordance with the reasons (retirement, certain reorganisations, disability
management option plan, which is approved by the Supervisory or death), and
Board. This plan sets out the procedures for share option ——the option holder loses the right to exercise his/her option
grants in more than 40 countries around the world. when he/she leaves the company for reasons other than
The significant aspects of the plan are: those mentioned above.

The exercise of options is subject to the TNT rules concerning

Inside information.

96
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
Statements of changes of outstanding options
The table below includes the outstanding options of the Board of
Management and former members of the Board of Management, as
well as eligible members of senior managers in the current TNT
group. All options granted entitle the holder of the allotment of
ordinary shares when they are exercised and are equity settled.

Number of options Amounts in € Remaining

Exercised Forfeited Share price years in
Statement of changes Outstanding during during Outstanding Exercise on exercise contractual
of outstanding options Year 1 Jan 2007 2007 2007 31 Dec 2007 price date life

Board of Management various 159,000 129,000 30,000

Management 2002 51,879 17,593 34,286 22.24 34.34
2003 163,527 83,793 150 79,584 13.85 32.64 3.1
2003 6,300 3,300 3,000 14.51 34.16 3.4
2004 1,282,536 934,163 7,344 341,029 18.44 32.18 4.3

Total 1,663,242 1,167,849 41,780 453,613

2007 2006
Number of Weighted average Number of Weighted average
Historic overview outstanding options options exercise price (in €) options exercise price (in €)

Balance at beginning of year 1,663,242 18.08 7,296,048 17.63

Discontinued operations (1,747,868) 17.77
Exercised (1,167,849) 32.27 (1,825,112) 27.37
Forfeited (41,780) 21.54 (2,059,826) 16.38

Balance at end of year 453,613 17.61 1,663,242 18.08

Exercisable at 31 December 453,613 17.61 225,456 15.80

Bonus/matching plan for senior management ——the matching shares are delivered three years after the
Members of a selected group of managers may on a voluntary delivery of the bonus shares. One matching share is
basis, participate in the bonus matching plan. In such case, they delivered for each bonus share that has been retained for
are paid 100% of their 2003, 2004, 2005, 2006 and 2007 bonus three years,
in cash and can convert 25% as a grant of TNT shares with an ——for each bonus share that is sold within three years, the
associated matching right in 2007 (75,498), 2006 (67,107), 2005 associated right to one matching share lapses. If more than
(121,345), 2004 (107,710) and in 2003 (54,405) if at least 50% of 50% of the bonus shares are sold within three years, the
the shares are kept for three years. The company sees the entire right to matching shares lapses with immediate effect,
bonus/matching plan as part of the remuneration package for ——where a participant leaves the company for certain reasons
the members of its top management, and it is particularly aimed (retirement, certain reorganisations, disability or death) the
at further aligning their interests with the interests of the right to matching shares will vest immediately and he/she
shareholders. The rights on bonus and matching shares are can exercise his/her right pro rata, and
granted in accordance with the bonus/matching plan, which ——a participant loses the right to exercise his/her right on
has been approved by the Supervisory Board. matching shares when he/she leaves the company for
reasons other than those mentioned above,
The significant aspects of the plan are:
——the grant of the right on bonus shares is in lieu of 25% of The exercise of the rights on matching shares is subject to the
an individual’s annual bonus payment, and bonus shares are TNT rules concerning Inside information that apply to TNT’s
delivered shortly after the right is granted, company. All awards under this plan are equity settled.
——the number of bonus shares is calculated by dividing 97
25% of an individual’s gross annual bonus relating to the Growth through networks
preceding financial year by the share price on the Annual report 2007
Euronext Amsterdam on the date the grant is made
CHAPTER 8
(2007: €32.37/share), Financial
——the rights on matching shares are granted for zero costs Statements
and the number of shares is equal to the number of
bonus shares,
 The table below summarises the status of the number of
outstanding rights on matching shares granted to senior
managers in the current TNT group:

Number of matching rights on shares

Vested
Bonus connecting matching Outstanding Granted or forfeited Outstanding Remaining years
rights Management Year 1 Jan 2007 during 2007 during 2007 31 Dec 2007 in contractual life
Management 2004 73,271 73,271
2005 86,776 5,550 81,226 0.3
2006 65,896 3,559 62,337 1.3
2007 75,498 2,170 73,328 2.3

Total 225,943 75,498 84,550 216,891

In 2007 the average price on vesting for matching shares for the 20  epreciation, amortisation and
D
management was €33.15. impairments: 349 million (2006: 318)
Impairment costs for property, plant and equipment of
Fair value assumptions and hedging €5 million (2006: 5) are included in the depreciation expense.
The impairment charges relate to the assets of the UK Parcel
TNT’s share based plans have been measured using the Monte contract in the Mail division.
Carlo fair value measurement method. Significant assumptions
used in TNT’s calculations are as follows:

2007 2006 2005 Year ended at 31 December 2007 2006

Share price (in €) 32.28 30.05 20.71 Amortisation of other intangibles 73 63
Volatility (%) 19.30 20.89 28.35 Depreciation and impairment
Vesting period (in years) 3 3 3 property, plant and equipment 276 255

Risk free rate (%) 4.33 3.60 2.39

Dividend yield (%) 2.48 2.29 3.13 Total 349 318
(in € millions)

As of 4 May 2007, the 2007 grant date, the fair value of the 21 O ther operating expense:
matching shares awarded was €29.88 and the fair value of the 714 million (2006: 578)
performance shares awarded was €17.03. The other operating expenses largely relate to Express for
€320 million (2006: 274) and Mail for €373 million (2006: 291).
As of 5 May 2006, the 2006 grant date, the fair value of the The other operating expenses consist of IT communication,
matching shares awarded was €28.13 and the fair value of the office cost, travel and training expense, consulting and other
performance shares awarded was €18.64. As of 27 April 2005, shared services cost.
the 2005 grant date, the fair value of the matching shares was
€18.62 and of TNT’s performance shares awarded was €14.11. Included within other operating expenses are costs incurred for
services provided by TNT’s group statutory auditors,
TNT manages its risk in connection with the obligations the PricewaterhouseCoopers Accountants N.V.
company has under the existing share and option plans by
purchasing shares in the market. In 2007, TNT purchased no In 2006 approximately €7 million was related to
shares for hedging purposes. discontinued business.

At 31 December 2007, TNT held a total of 1,716,060 shares In 2007, fees for audit services included the audit of TNT’s
to cover share and options schemes (2006: 2,884,441). annual financial statements, procedures on internal controls

98
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
and the review of interim financial statements, statutory audits, The fees can be divided into the following categories:
services associated with issuing an audit opinion on the postal
concession reporting and services that only the auditor can Year ended at 31 December 2007 2006
reasonably provide. Fees for audit related services include
Audit fees 9 14
employee benefit plan audits, due diligence related to mergers
and acquisitions, internal control reviews, consultation Audit related fees 3 9
concerning financial accounting and reporting matters not Tax advisory costs 0 0
classified as audit. Fees for tax services include tax compliance,
Other fees 1 0
tax advice, including all services performed by the auditor’s
professional staff in its tax division, except those rendered in
connection with the audit. Fees for other services include Total 13 23
financial risk management reviews and audit of corporate (in € millions)
sustainability reports.

22 Net financial income and expenses: -94 million (2006: - 47)

Year ended at 31 December 2007 2006
Interest and similar income 85 188
Fair value change fair value hedges 3 11
Fair value change of financial assets through profit and loss 9

Total interest and similar income 97 199

Interest and similar expenses (184) (235)
Fair value change cashflow hedge recycled to profit and loss (1)
Fair value change fair value hedges (3) (11)
Net foreign exchange losses (3)

Total interest and similar expenses (191) (246)

Net financal expenses (94) (47)

(in € millions)

Interest and similar income €6 million (2006: 21) and interest on funding the discontinued
Interest and similar income in 2007 of €97 million (2006: 199) business of €0 million (2006: 21).
mainly relates to interest income on banks, loans and deposits
of €69 million (2006: 109) of which €58 million (2006: 93) 23 Income taxes: 316 million (2006: 395)
relates to a gross up of interest on cash pools (fully offset by an Income taxes in the statements of income of 2007 amount to
equal amount in interest expenses), interest on taxes of €316 million (2006: 395), or 28.8% (2006: 32.3%) of income
€5 million (2006: 1) and interest on foreign currency hedges of before income taxes.
€5 million (2006: 15) and financial income on funding the
discontinued business of €1 million (2006: 73). Year ended at 31 December 2007 2006

The change of the fair value hedge of €3 million positive relates Dutch statutory income tax rate: 25.5 29.6
to the short term €500 million interest rate swaps which is Adjustment regarding effective
offset by the fair value change of €3 million negative on the income tax rates other countries 2.6 0.8
5.125% Eurobond 2008, see note 14. Permanent differences:
Non and partly deductible costs 1.0 1.5
The fair value change of the financial assets through profit and
loss relates to the remeasurement of the equity stake, see note 3. Exempt income (0.4) (0.7)
Other 0.1 1.1
Interest and similar expenses
99
Interest and similar expenses in 2007 of €191 million mainly Growth through networks
relate to interest expense on bank overdrafts and bank loans of Effective income tax rate 28.8 32.3 Annual report 2007
€79 million, (2006: 117) of which €58 million (2006: 93) relate (in percentages)
CHAPTER 8
to a gross up of interest on cash pools (fully offset by an equal Financial
amount in interest income), interest expenses on long term Statements
borrowings of €75 million (2006: 52), interest on foreign
currency hedges of €18 million (2006: 31), interest on taxes
 Income taxes differ from the amount calculated by multiplying Income tax expense consists of the following:
the Dutch statutory corporate income tax rate with the income
before income taxes. In 2007, the effective income tax rate was Year ended at 31 December 2007 2006
28.8% (2006: 32.3%), which is higher than the statutory
corporate income tax rate of 25.5% in the Netherlands (2006: Current tax expense 269 396
29.6%). This is due to several permanent differences such as Changes in deferred taxes
non-deductible costs, exempt income and the effect of different (excluding acquisitions/foreign
statutory tax rates in countries outside the Netherlands. The exchange effects) 47 (1)
line “other” in 2007 includes a positive impact of 6.4% relating
to the recognition of deferred tax assets for loss carry forward Total income taxes 395
316
positions that were previously unrecognised. TNT was able to
(in € millions)
recognise these assets based on improvements in actual and
projected future results, now enabling the group to substantiate
that recoverability of the assets is probable. This effect was In 2007, the current tax expense amounted to €269 million
partly balanced by the adverse effect of 3.5% of losses for which (2006: 396). The difference between the total income taxes in
no deferred tax assets could be recognised due to uncertainty the statements of income and the current tax expense is due to
regarding the recoverability of such assets. In addition, the line timing differences. These differences are recognised as deferred
“other” includes a net adverse impact of 2.2% on TNT’s tax assets or deferred tax liabilities.
deferred tax position caused by a decrease of statutory tax
rates in several countries. The remaining “other” of 0.8% The income tax receivable at 31 December 2007 amounts to
consists of a total of several smaller effects. €35 million (2006: 8) and the income tax payable amounts to
€69 million (2006: 280). In 2007 TNT paid income taxes for an
The following table shows the movements in deferred amount of €492 million (2006: 282) of which €166 million
tax assets: related to prior years.

Property, plant Losses carried

Provisions and equipment forward Other Total
Deferred tax assets at 31 December 2005 18 6 71 93 188
Transfers to assets held for sale (1) (2) (3)
Changes charged directly to equity 15 15
Changes via statements of income 14 2 (6) (1) 9
(De)consolidation/foreign exchange effects (1) 3 2

Deferred tax assets at 31 December 2006 32 8 63 108 211

Reclassifications (3) (6) (1) (11) (21)
Changes charged directly to equity (5) (5)
Changes via statements of income (2) 5 46 (29) 20
(De)consolidation/foreign exchange effects (1) (1) (2)

Deferred tax assets at 31 December 2007 27 7 107 62 203

(in € millions)

100
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
For deferred tax assets an amount of €10 million (2006: 14) is to TNT has not recognised €96 million (2006: 158) of the potential
be recovered within 12 months and an amount of €193 million is future tax benefits and has recorded deferred tax assets of
to be recovered after 12 months (2006: 197). €107 million at the end of 2007 (2006: 63).
Deferred tax assets and liabilities are presented net in the
balance sheet if TNT has a legally enforceable right to offset The expiration of total accumulated losses is presented in the
current tax assets against current tax liabilities and the deferred table below:
taxes relate to the same fiscal authority.
2008 9
Out of the total “other” deferred tax assets of €62 million
(2006: 108) an amount of €40 million (2006: 61) relates to 2009 9
temporary differences for assets that are both capitalised and 2010 18
depreciable for tax purposes only.
2011 25
The total accumulated losses available for carry forward at 31 2012 and thereafter 261
December 2007 amounted to €720 million (2006: 689). With Indefinite 398
these losses carried forward, future tax benefits of €203 million
could be recognised (2006: 221). Tax deductible losses give rise
to deferred tax assets at the statutory tax rate in the relevant Total 720
country. Deferred tax assets are recognised if it is probable that (in € millions)

they will be realised. The probability of the realisation is

impacted by uncertainties regarding the realisation of such The following table shows the movements in deferred tax
benefits, for example as a result of the expiry of tax losses liabilities:
carried forward and projected future income. As a result

Property, plant
Provisions and equipment Other Total
Deferred tax liabilities at 31 December 2005 153 62 18 233
Transfers to liabilities related to assets held for sale (2) (2)
Changes via statements of income (8) 3 13 8
(De)consolidation/foreign exchange effects 1 1

Deferred tax liabilities at 31 December 2006 145 65 30 240

Reclassifications (3) 7 (25) (21)
Changes via statements of income 58 12 (3) 67
(De)consolidation/foreign exchange effects 3 9 12

Deferred tax liabilities at 31 December 2007 200 87 11 298

(in € millions)

For deferred tax liabilities an amount of €44 million (2006: 19) Cash generated from operations
is to be settled within 12 months and an amount of €254 million The cash generated from operations decreased from
(2006: 221) is to be settled after 12 months. €1,338 million in 2006 to €1,313 million in 2007. In 2007
profit before income taxes contributed €1,099 million and
€1,448 million if adjusted for the non-cash impact of
Notes to the consolidated depreciation, amortisation and impairments. This is €93
million lower compared to 2006 (2006: 1,541).
cash flow statements The changes in pension liabilities of €179 million compared to
2006 (2006: 124) reflects the total non-cash pension charge for
24 Net cash from operating activities the defined benefit pension schemes of €45 million (2006: 120)
(continuing operations): 643 million (2006: 857) and TNT’s total cash contributions to various pension plans
The net cash from operating activities decreased by €214 of €212 million (2006: 243) reflecting the increased solvency of
101
million from €857 million in 2006 to €643 million in 2007. The TNT’s pension fund and a reduced number of eligible employees. Growth through networks
non-cash transactions in the cash flow statements relate to Annual report 2007
depreciation, amortisation and impairment charges, share In 2007, the net working capital increased by €77 million
CHAPTER 8
based payment expenses, result from investments in associates, compared 2006. The increase is mainly a result of organic Financial
foreign exchange gains and losses, investments in property, growth and acquisitions within the Express and EMN business. Statements
plant and equipment financed via financial leases, book result on
sale of property, plant and equipment and changes in provisions.
 Interest paid 26Net
 cash used in financing activities (continuing
The total cash out flow for interest paid in 2007 is €178 million operations): - 635 million (2006: -2,152)
(2006: 199). In 2007 interest paid mainly includes interest on Repurchases of shares
TNT’s long term borrowings of €67 million (including financial Under TNT’s share buy-back programme announced on
leases of €12 million and long term interest derivatives of €6 6 November 2006 TNT purchased 3.3 million of its ordinary
million) (2006: 53), interest payments of €79 million relating to shares in 2007 for an amount of €113 million. In addition,
short term debt (of which €58 million (2006: 89) is a gross up €6 million has been paid in 2007 for ordinary shares purchased
due to cash pools which is offset in the interest received), in 2006. Under TNT’s share buy-back programme announced
realised interest on foreign currency hedges of €17 million on 20 April 2007 the company purchased 12.6 million of its
(2006: 17), and interest paid on taxes of €11 million (2006: 7). ordinary shares in 2007 for an amount of €400 million. Under
TNT’s share buy-back programme announced on 30 July 2007
Taxes paid the company purchased 7.0 million ordinary shares in 2007 for
The cash outflow of the total tax payments increased by an amount of €194 million, of which €3 million relates to the
€210 million from €282 million in 2006 to €492 million in 2007, purchase during the last days of 2007 and is to be paid in 2008.
of which €166 million related to prior years.
In addition to the share buy-back programmes the company
25 et cash used in investing activities (continuing
N purchased no ordinary shares in 2007 to cover TNT’s
operations): - 8 million (2006: 1,068) obligations under the existing management option plans and
Acquisition of group companies (net of cash) share grants.
In 2007, the total payments net of cash for acquisitions of group
companies amounted to €287 million (2006: 89). The most TNT received cash payments of €29 million (2006: 52) for the
significant acquisitions in 2007 related to the Express division exercise of employee stock options in 2007. This decrease is
(€264 million), among others, the acquisitions of Mercúrio due to the accelerated vesting of options of the Logistics
Expresso SA (€147) and Hoau (€114). participants in 2006.
Mail acquired for a total amount of €23 million mainly related
to Regio-ES GmbH and Mail Express Gmbh, see note 28. Proceeds from and Repayments to long
term borrowings
Investments in associates The total proceeds on long term borrowings mainly relate to
The cash paid for investments in associated companies of TNT’s new issued 5.375% Bond 2017 with proceeds of
€29 million primarily related to additional funding for €645 million and the new acquired long term bank loans of
Logispring Investment Fund Holding B.V. €14 million. The Bond has a nominal value of €650 million and
the cash receipt of €645 million is due to the issuance of the
Disposal of group companies and joint ventures Bond under par and related fees. The total repayments of
During 2007, the freight management business has been sold €20 million (2006: 53) mainly relates to repayments of long
resulting in cash proceeds of €486 million. term bank loans. The majority of these loans have been
acquired through the Mercúrio acquisition.
Capital expenditure on intangible assets and
property, plant and equipment Proceeds from and Repayments to short
In 2007, capital expenditures on property, plant and equipment term borrowings
amounted to €272 million (2006: 277). This is excluding the The total proceeds on short term borrowings relate to new
purchase of a Boeing 747 of €110 million which is funded by acquired short term bank debt of €99 million (2006: 328).
means of a finance lease. Of this amount, €197 million The total repayments mainly relate to repayments on TNT’s
(2006: 198) related to Express, €73 million (2006: 74) to Mail commercial paper programme of €287 million and to
and €2 million (2006: 5) to other. The capital expenditures on repayments of short term bank debt of €45 million (2006: 161).
intangible assets of €97 million (2006: 103) mostly related to
software. In 2007, capital expenditures were funded primarily Repayments to finance leases
by cash generated from operations. The total repayments relate to redemptions on the two Boeing
747’s of €10 million (2006: 4) and to redemptions on other lease
Proceeds from sale of property, plant and contracts of €9 million (2006: 6).
equipment and intangible assets
Proceeds from the sale of property, plant and equipment in Dividends paid
2007 totalled €85 million (2006: 65), which mainly related to A final cash dividend over 2006, amounting to €183 million or
the sale of several buildings from TNT Real Estate B.V. and €0.47 per ordinary share and a cash interim dividend for 2007
TNT Real Estate Development B.V. (totalling €57 million) and of €115 million or €0.30 per ordinary share were paid in 2007.
buildings and equipment from the joint venture Postkantoren
B.V. (€5 million) in the Mail segment and equipment in the Financing related to TNT’s discontinued operations
Express operations (€19 million). In 2007 the net cash flow used in financing TNT’s discontinued
freight management business amounted to €18 million
Interest received (2006: 276).
102
Growth through networks In 2007 interest received amounted to €85 million (2006: 111).
Annual report 2007 In 2007 interest received mainly includes interest relating to
short term deposits of €69 million (2006: 101) of which
CHAPTER 8
Financial €58 million (2006: 89) is a gross up due to cash pools which is
Statements offset in the interest paid), realised interest on foreign currency
hedges of €5 million (2006: 6) and interest received on taxes of
€5 million (2006: 0).
27 Reconciliation to cash and cash equivalents
The following table presents a reconciliation between the cash
flow statements and the cash and cash equivalents as presented
in the balance sheet.

Year ended at 31 December 2007 variance % 2006

Cash at the beginning of the year 326 (50.8) 663
Cash from divested businesses (29) (48)
Exchange rate differences (3) (5)
Total change in cash (as in consolidated cash flow statements) 1 (284)

Cash at the end of the year 295 (9.5) 326

of which dicontinued business 0 (29)
Cash at the end of the year as reported 295 (0.7) 297
(in € millions, except percentages)

Additional notes
28 Business combinations
(No corresponding financial statement number)

Summary of principal acquisitions in the year 2007

Month Acquisition Goodwill on

Company name Segment acquired % owner Cost Acquisition
Expresso Mercúrio S.A. Express January 100% 148 135
Huayu Hengye Logistics Company Limited Express March 100% 136 97
Regio — ES GmbH Private Briefbeförderung Mail January 100% 6 5
Mail Express GmbH Mail December 100% 4 4
Other acquisitions (including some remaining shares) 20 15

Total 314 256

(in € millions)

Goodwill arising from the acquisitions of interest in newly TNT acquisitions in 2007 have generally centred on addressing
acquired group companies and from extending TNT’s interest TNT’s long term strategic plans. The main factors that
in group companies amount to €256 million (2006: 99). The contributed to a cost that resulted in the recognition of
total acquisition costs amount to €314 million (2006: 110) of goodwill are summarised below:
which €287 million was paid in cash (2006: 89). The acquisition
costs of €314 million also include an amount of €12 million of ——Mercúrio is market leader in the Brazilian domestic express
acquired cash and an amount of €15 million to be paid as at 31 market and provides TNT with a platform to further
December 2007 being the contingent consideration. develop an integrated South American road express
network. Combining Mercúrio’s domestic road network
The larger acquisitions in 2007 relate to Expresso Mercúrio S.A. with TNT’s international air and road network capacity is an
(Mercúrio) and Huaya Hengji Logistics Company LIM (Hoau). embodiment of TNT’s focus on networks strategy.
On these acquisitions an amount of goodwill of €232 million ——Acquiring Hoau is at the core of TNT’s strategic focus on
was recognised. integrated domestic and international networks and it
enables the company to link China to TNT’s Asian
road network.
103
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 The pre-acquisition balance sheets and the opening balance
sheets of the acquired businesses is summarised in the
table below:

Pre-acquisition
balance sheets
(unaudited) Acquisitions
Goodwill 4 260
Other non-current assets 38 101
Total non-current assets 42 361
Total current assets 53 54

Total assets 95 415

Equity 8 312
Non-current liabilities 47 62
Current liabilities 40 41

Total liabilities and equity 95 415

(in € millions)

Other non-current assets include an amount of approximately

€65 million relating to separately identified intangible assets.

Acquiree’s results
The total acquiree’s net income attributable to shareholders
accounted within TNT, since acquisition date, amounts to
-€16 million. This relates to Mercúrio for an amount of
-€9 million, Hoau for an amount of -€6 million and to other
acquisitions for an amount of -€1 million.
Huayu Hengye Logistics
Expresso Mercúrio S.A. Company Limited
Pre-acquisition Pre-acquisition
balance sheets balance sheets
(unaudited) Acquisition (unaudited) Acquisition
Goodwill 0 135 0 97
Other non-current assets 26 61 11 37
Total non-current assets 26 196 11 134
Total current assets 26 26 13 14

Total assets 52 222 24 148

Equity (12) 143 13 137

Non-current liabilities 46 61 1 1
Current liabilities 18 18 10 10

Total liabilities and equity 52 222 24 148

(in € millions)

104
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
Pro-forma results
The following represents the pro-forma results of TNT for
2007 as if these acquisitions had taken place on 1 January 2007.
These pro-forma results do not necessarily reflect the results
that would have arisen had these acquisitions actually taken
place on 1 January 2007, nor are they necessarily indicative of
the future performance of TNT. This calculation also includes
the impact of amortisation of identified intangible assets.

Pro-forma results As reported

Year ended at 31 December (unaudited) 2007 2007
Total revenues 11,071 11,017
Profit for the period from continuing operations 777 783
Profit attributable to the equity holders of the parent 979 986
Earnings per ordinary share (in € cents) 255.6 257.4
Earnings per diluted ordinary share (in € cents) 254.2 256.1
(in € millions, except per share data)

At 31 December
29 Commitments and contingencies Payable in the period 2007 2006
(No corresponding financial statement number) Less than 1 year 249 222
Between 1 and 2 years 208 199
At 31 December 2007 2006 Between 2 and 3 years 144 146
Commitments relating to: Between 3 and 4 years 94 102
Financial guarantees 227 211 Between 4 and 5 years 64 65
Operating guarantees 218 137 Thereafter 200 175
Rent and operating lease 959 909
Capital expenditure 42 150 Total 959 909
Repurchases own shares 6 113 of which guaranteed by
Purchase commitments 80 58 a third party/customers 9 3
(in € millions) (in € millions)

Of the total commitments indicated above, €528 million are Capital expenditure
of a short term nature (2006: 662). Commitments in connection with capital expenditure were
€42 million (2006: 150) mainly related to property, plant and
Financial and operating guarantees equipment of €21 million and €1 million related to intangible
Total guarantees at 31 December 2007 were €445 million assets. These commitments primarily related to projects within
(2006: 348). Of these guarantees, TNT issued corporate the operations of the Express division.
guarantees up to the amount of €295 million (2006: 183).
Banks and other financial institutions issued guarantees up to Repurchases own shares
the amount of €150 million (2006: 165). The obligations under Under the first €200 million tranche of the €500 million
the bank guarantees have been secured by the company repurchase programme, announced on 9 November 2007
or its subsidiaries. (also see note 9), TNT purchased shares for a total amount of
€6 million after 31 December 2007. As at 4 January 2008,
Of the amount of €445 million, financial guarantees TNT completed this first tranche of the €500 million
amounted to €227 million (2006: 211) and were mainly repurchase programme.
issued in connection with TNT’s obligations under lease
contracts, custom duty deferment, airline cargo services, Purchase commitments
credit lines and insurance contracts. Operating guarantees At 31 December 2007 TNT had unconditional purchase
amounted to €218 million (2006: 137) and were mainly commitments of €80 million (2006: 58) which were primarily
issued in connection with mailing and other service related to various service and maintenance contracts. These
performance contracts. contracts for service and maintenance related primarily to
105
information technology, security, salary registration, cleaning Growth through networks
Rent and operating lease contracts and aircraft. Annual report 2007
In 2007 operational lease expenses (including rental) in the
CHAPTER 8
consolidated statements of income amounted to €404 million Contingent tax liabilities Financial
(2006: 375). Future payments on non-cancellable existing lease Multinational groups of the size of TNT are exposed to varying Statements
contracts mainly relating to real estate, computer equipment degrees of uncertainty related to tax planning and regulatory
and other equipment were as follows: reviews and audits. TNT accounts for its income taxes on the
 basis of its own internal analyses, supported by external advice. known. Should the Supreme Court ultimately decide to cancel
TNT continually monitors its global tax position, and whenever the 2004 judgement, the matter will be referred to another
uncertainties arise, TNT assesses the potential consequences Belgian Court of Appeal for a new exchange of briefs,
and either accrues the liability or discloses a contingent liability pleadings and ruling.
in its financial statements, depending on the strength of the
company’s position and the resulting risk of loss. 30 Financial risk management
(No corresponding financial statement number)
As previously disclosed, since August 2004, TNT has been
preparing an addendum to its original report to the UK tax TNT’s activities expose the company to a variety of financial
authorities that covers UK tax matters that were not the risks, such as market risks (including foreign currency exchange
subject of the original investigation. In 2006 TNT submitted a risk and interest rate risk), credit risk and liquidity risk.
substantially advanced draft of available information and related All of these risks arise in the normal course of business.
tax conclusions required by the UK tax authorities and started In order to manage the market risks TNT utilises a variety of
discussions with them on these tax matters. In December 2007 financial derivatives.
a full closure has been brought to all tax investigations with the
settlement of all UK tax matters with no additional liabilities The following analyses provide quantitative information
beyond what had been accrued for in previous years. regarding TNT’s exposure to the financial risks described
above. There are certain limitations inherent in the analyses
Contingent legal liabilities presented, primarily due to the assumption that rates change in
Ordinary course litigation a parallel fashion and instantaneously. In addition, the analyses
The company is involved in several legal proceedings relating to are unable to reflect the complex market reactions that
the normal conduct of its business, such as claims for loss of normally would arise from the market shifts assumed.
goods, delays in delivery, trademark infringements,
subcontracting and employment issues, and general liability. TNT uses derivative financial instruments solely for the
The majority of these claims are for amounts below €1 million purpose of hedging exposures. The company enters into
and are insured and/or provided for. TNT does not expect any contracts related to derivative financial instruments for periods
liability arising from any of these legal proceedings to have a commensurate with its underlying exposures and does not take
material effect on its results of operations, liquidity, capital positions independent of these exposures. None of these
resources or financial position. The company believes it has financial instruments are leveraged or used for trading purposes
provided for all probable liabilities deriving from the normal or to take speculative positions.
course of business.
Financial risk management is carried out by Group Treasury
Subcontractor suits in France under policies approved by the Board of Management. Group
Over the years, the authorities in France have brought several Treasury identifies, evaluates and hedges financial risks in close
criminal and civil actions relating to TNT’s Express division’s cooperation with operating units. The Board provides written
French operations alleging that TNT’s subcontractors or their principles for overall risk management, as well as written
employees should be regarded as TNT’s own unregistered policies covering specific areas, such as foreign exchange risk,
employees. The actions seek criminal fines or the payment of interest rate risk, credit risk and liquidity risk. Periodic
social security contributions, wage taxes and overtime reporting on financial risks has been embedded in the overall
payments in respect of such employees. Similar actions have risk framework and has been provided to the Board of
been brought against TNT’s competitors. Management in a structural way.

Of the cases on which the company reported in its annual Interest rate risk
report in 2006, the case that pertains to fines imposed on TNT Part of TNT’s borrowings and leases are against floating
Express International SNC and its regional operations director interest rates. These floating interest rates may fluctuate
under a ruling by the Court of Appeal in Paris has not yet been substantially and could have a material adverse effect on TNT’s
concluded. Following a rejection of TNT’s request by the financial results in any given reporting period. Borrowings that
French Supreme Court, the company has brought this matter are issued at variable rates, expose the company to cash flow
to the attention of the European Court of Human Rights, which interest risks. Borrowings that are issued at fixed rates expose
has agreed to hear the case. TNT obtained discharges of the the company to fair value interest rate risk. TNT’s financial
other cases relating to subcontractors previously reported. assets are on average of such short term nature that they bear
no significant interest rate risks.
Liège court case
In Belgium, judicial proceedings were launched by people living Group policy is to significantly limit the impact of interest
around Liege airport to stop night flights and seek fluctuations over a term of seven years as a percentage of
indemnification from the Walloon Region, Liege airport and its earnings before interest, taxes, deprecation and amortisation.
operators (including TNT). On 29 June 2004 the Liege court of At 31 December 2007, TNT’s gross interest bearing
appeal rejected the plaintiffs’ claims on the basis of a borrowings, including finance lease obligations, totalled
substantiated legal reasoning. Thereupon, the plaintiffs lodged €2,085 million (2006: 1,566), of which €1,860 million
106
Growth through networks an appeal with the Belgian Supreme Court, which court may (2006: 1,290) was at fixed interest rate.
Annual report 2007 only examine pure points of law or procedural items. It does
not examine facts. On 14 December 2006, the Supreme Court Although, TNT generally enters into interest rate swaps and
CHAPTER 8
Financial decided to postpone its rendering of a decision, and filed two other interest rate derivatives in order to attempt to reduce its
Statements pre-judicial questions with the European Court of Justice (ECJ). exposure to interest rate fluctuations, these measures may be
As a result, it may now take another year or two before the inadequate or may subject the company to increased operating
outcome of the proceedings before the Supreme Court is or financing costs.
At 31 December 2007, if interest rates on borrowings had been transactions are unable to fulfill the terms of the agreements.
1% higher with other variables held constant the profit before Credit risk arises from cash and cash equivalents, derivatives
income tax would have been €3 million lower, mainly due to and deposits with banks and financial institutions as well as
€500 million of outstanding interest rate swaps (see also note credit exposures relating to customers. The company attempts
31) (2006: -5). The profit before income taxes is less sensitive to to minimise its credit risk exposure by only transacting to
interest rate movements compared to 2006 due to a decrease financial institutions that meet established credit guidelines and
in short term interest bearing debt. Equity would be impacted by managing its customer’s portfolio. TNT continually monitors
by €36 million positive (2006: 42), due to the outstanding the credit standing of financial counterparties and its
forward starting interest rate swaps and the USD interest rate customers. Individual risk limits are set on internal and external
swap(s), see note 31. ratings in accordance with limits set by the board. The
utilisation of credit limits is regularly monitored. At reporting
Foreign currency exchange risk date there were no significant concentrations of credit risk.
TNT operates on an international basis generating foreign
currency exchange risks arising from future commercial Liquidity risk
transactions, recognised assets and liabilities, investments and Prudent liquidity risk management implies maintaining sufficient
divestments in foreign currencies other than the euro, TNT’s cash and marketable securities, the availability of funding
functional and reporting currency. TNT’s treasury department through an adequate amount of committed credit facilities and
matches and manages the intragroup and external financial the ability to close out market positions. Due to the dynamic
exposures. Although the company generally enters into hedging nature of the underlying businesses, TNT attempts to maintain
arrangements and other contracts in order to reduce its flexibility in funding by keeping committed credit lines available.
exposure to currency fluctuations, these measures may be A downgrade in TNT’s credit rating may negatively affect its
inadequate or may subject the company to increased operating ability to obtain funds from financial institutions and banks and
or financing costs. increase its financing costs by increasing the interest rates of its
outstanding debt or the interest rates at which the company is
The main two currencies of TNT’s external hedges are the able to refinance existing debt or incur new debt. Furthermore,
British pound and US dollar of which the 2007 exchange rates other non TNT specific adverse market conditions could also
are shown below: turn out to have a material adverse effect on the company’s
funding ability.
Year end closing 1 Annual average 2
TNT has the following committed facilities:
British pound 0.7334 0.6869
US dollar 1.4721 1.3789
At 31 December 2007 2006
1 – Source: European Central Bank, reference rate on the last day of the year.
2 – The annual average is calculated as the 12-months’ average of the month-end closing Multicurrency Revolving Credit Facility 1,000 1,000
rates of the European Central Bank.
Multicurrency Revolving Credit Facility 600

Management has set up a policy to require group companies to

Total commited facilities 1,000 1,600
manage their foreign exchange risk against the functional
(in € millions)
currency. Group companies are required to hedge material
balance sheet exposures via the use of foreign exchange
derivatives with Group Treasury, whereby a financing company The multicurrency revolving credit facility of €600 million has
operated by Group Treasury, as ‘in-house-bank’ trades these been terminated as this was not longer necessary, partly due to
foreign exchange derivatives back-to-back with external banks. the issuance of the 5,375% Eurobond 2017 of €650 million.
TNT currently has no net investment hedges outstanding.
Significant acquisitions and local debt is usually funded in the
currency of the underlying assets.

At 31 December 2007, if the euro had weakened 25% against

the US Dollar with all other variables held constant, the profit
before income tax would have been €1 million higher
(2006: -35). The profit before income taxes is less sensitive to
movements in EUR /USD exchange rates compared to 2006
due to the decreased USD exposure. Equity would be impacted
by €4 million (2006: 5).

At 31 December 2007, if the euro had weakened 25 % against

the British pound with all other variables held constant the
profit before income tax would have been €1 million lower
(2006: 5). The profit before income taxes is less sensitive to
107
movements in EUR/GBP exchange rates compared to 2006 Growth through networks
due to the decreased GBP exposure. Equity would be impacted Annual report 2007
by €1 million (2006: 2).
CHAPTER 8
Financial
Credit risk Statements
Credit risk represents the loss that the company would incur if
counterparties with whom TNT enters into financial
 The table below analyses TNT’s financial liabilities into relevant
maturity groupings based on the remaining period on the balance
sheet to the contractual maturity date. The outgoing flows
disclosed in the table are the contractual undiscounted cash
flows which contain the redemptions and interest payments.

Less than Between Between

Liquidity risk schedule 1 year 1 and 3 years 3 and 5 years Thereafter Bookvalue
Outgoing flows based on the
financial liablities 2007
Euro Bonds 729 101 101 1,271 1,656
Other loans 92 3 2 5 105
Financial leases 47 65 64 263 241
Interest rate swaps — outgoing 52 49 298 27 37
Foreign exchange contracts — outgoing 642 9
Short term bank debt 46 46
Trade accounts payable 336 336
Other current liabilities 149 149

Mitigation incoming flows based on the

financial liabilities 2007
Interest rate swaps — incoming 49 38 271 28
Foreign exchange contracts — incoming 642

1,402 180 194 1,538 2,579

Outgoing flows based on the

financial liablities 2006
Euro Bonds 49 710 31 462 1,004
Other loans 336 12 2 6 340
Financial leases 20 40 41 117 158
Interest rate swaps — outgoing 41 29 23
Foreign exchange contracts — outgoing 621 6
Short term bank debt 41 41
Trade accounts payable 308 308
Other current liabilities 163 163
Assets held for sale 136 136

Mitigation incoming flows based on

the financial liabilities 2006
Interest rate swaps — incoming 26 26
Foreign exchange contracts — incoming 621
1,068 765 74 585 2,179
(in € millions)

The outgoing cash flows in 2007 relating to the Eurobond of TNT’s capital structure is managed along the following
€729 million consist of the redemption of the nominal value of components: (I) maintain a credit rating at investment grade
€646 million of the 5.125% Eurobond 2008 due at 5 December around “BBB+ level”; (2) an availability of at least €500 million
2008. The remainder consist of interest to be paid of all the of undrawn committed facilities (via a €1,000 million euro
108
Growth through networks outstanding bond which occur at June, November and December commercial paper programme supported by a bank facility until
Annual report 2007 2012); (3) structured funding via a combination of public and
CHAPTER 8
Capital structure management bank debt, with a risk weighted mix of fixed and floating
Financial It is TNT’s objective when managing capital structure to interest; (4) cash pooling systems facilitating optimised cash
Statements safeguard its ability to continue as a going concern in order to requirements for the group and (5) a tax optimal internal and
provide returns for shareholders and benefits for other external funding focused at optimising the cost of capital for the
stakeholders and to maintain an optimal capital structure. group, within long term sustainable boundaries.
31 Financial instruments
(No corresponding financial statement number)

Summary financial instruments

The accounting policies for financial instruments have been
applied to the following line items:

Financial assets at Held to

Loans and fair value through maturity Available
At 31 December Note receivables profit and loss investments for sale Total
Assets as per balance sheet 2007
Other loans receivable 3 5 5
Other prepayments and accrued income 3 21 13 34
Accounts receivable 5 1,656 1,656
Prepayments and accrued income 6 231 5 236
Cash and cash equivalents 7 295 295

Total 2,208 18 0 0 2,226

Assets as per balance sheet 2006

Other loans receivable 3 7 7
Other prepayments and accrued income 3 21 17 38
Accounts receivable 5 1,561 1,561
Prepayments and accrued income 6 224 3 227
Cash and cash equivalents 7 297 297
Assets held for sale 173 173

Total 2,283 20 0 0 2,303

(in € millions)

Financial liabilities Financial liabilities

measured at through profit
At 31 December Note amortised costs and loss Total
Liabilities as per balance sheet 2007
Long term debt 13 1,265 29 1,294
Trade accounts payable 336 336
Other current liabilities 14 932 17 949

Total 2,533 46 2,579

Liabilities as per balance sheet 2006

Long term debt 13 1,164 19 1,183
Trade accounts payable 308 308
Other current liabilities 14 542 10 552
Liabilities related to assets classified as held for sale 136 136

Total 2,150 29 2,179

109
(in € millions) Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 Eurobond
The total €1,696 million (2006: 1,046) of Eurobonds is
measured at amortised cost of €1,664 million (2006: 1,015),
being the nominal value corrected for the costs and issuance
under par (‘at a discount’) that is still to be amortised. A fair
value adjustment of positive €8 million (2006: 11) will adjust the
amortised cost value to the book value (‘carrying value’) of
€1,656 million (2006: 1,004). The fair value adjustment of
positive €8 million (2006: 11) is mitigated by the negative €8
million (2006: -11) of fair value on the €500 million (2006: 500)
of interest rate swaps outstanding for which TNT receives fixed
interest and pays floating interest. These interest rate swaps act
as a hedge against the fair value interest rate risk of TNT’s
5.125% December 2008 Eurobond.

For the outstanding Eurobonds, see the table below:

Costs /
Nominal discount to Hedge Fair value
At 31 December value be amortised accounting adjustment Carrying value Fair value
Eurobonds 2007
5.125% Eurobond 2008 646 1 Yes 8 637 645
3.875% Eurobond 2015 400 27 No 373 390
5.375% Eurobond 2017 650 4 No 646 688

1,696 32 8 1,656 1,723

Eurobonds 2006
5.125% Eurobond 2008 646 2 Yes 11 633 660
3.875% Eurobond 2015 400 29 No 371 400

1,046 31 11 1,004 1,060

(in € millions)

The fair value has been calculated against the relevant market
rates at 31 December 2007.

Finance leases
Total debt on finance leases consist of financial lease contracts
on buildings (depots), trucks and airplanes. The increase mainly
relates to the increase in the long term portion of finance leases
as a consequence of the lease of the second Boeing 747-ERF.

For the outstanding finance leases, see the table below:

Fixed / floating Hedge

At 31 December Nominal value interest accounting Carrying value Fair value
Finance leases 2007
Boeing 747 ERF 186 floating Yes 186 186
Other leases 55 floating / fixed No 55 52

241 241 238

Finance leases 2006
110
Growth through networks Boeing 747 ERF 104 floating Yes 104 106
Annual report 2007
Other leases 54 floating / fixed No 54 49
CHAPTER 8
Financial
Statements 158 158 155
(in € millions)
The fair value has been calculated against the relevant market swaps act as a hedge against the cash flow interest rate risk on
rates at 31 December 2006. the floating interest component within the Boeing 747-ERF
finance lease contracts.
Interest rate swaps
TNT has €500 million (2006: 500) of interest rate swaps As all forward starting swaps have been designated as cash flow
outstanding for which TNT receives fixed and pays floating hedges, the market value movements of the effective portion of
interest. These interest rate swaps act as a hedge against the the hedges have been included in equity. TNT has unwound
fair value interest rate risk of TNT’s 5.125% December 2008 €600 million and US$154 million of outstanding forward
Eurobond. Furthermore TNT has €400 million (2006: 600) of starting interest rate swaps whereby the company paid a total
forward starting interest rate swaps outstanding that hedge the market value of €4 million. Because the forward starting
yearly future cash flow risk on the interest costs of the next to interest rate swaps have been designated as a cash flow hedges,
occur debt. Of the total of €1,000 million of forward starting the market value will stay in equity and will be straight-line
swaps, €600 million was unwound upon issuance of the €650 amortised to income.
million 2017 Eurobond.
The total ineffective portion recognised in the income
In 2006 a US$154 million forward starting interest rate swap statement that arises from the usage of fair value hedges
was outstanding to hedge the variability in the future interest amounts to a profit/loss of €0 million (2006: 0 million).
payments on the second Boeing 747-ERF finance lease. This The total ineffective portion recognised in the income
swap became effective upon execution of this second lease statement that arises from the usage of cash flow hedges
contract. At the end of 2007 TNT has US$287 million (2006: amounts to a loss of €1 million (2006: 0 million).
139) of interest rate swaps outstanding for which the company
receives floating US$ interest and pays 5%. These interest rate An overview of interest rate swaps is presented below:

At 31 December

Forward Fair value Settlement

Nominal Starting Currency Outstanding Pay Receive Hedge in Euro amount in Euro
Interest rate swaps 2007
500 No Euro Yes floating fixed fair value (8)
400 Yes Euro Yes fixed floating cash flow 1
600 Yes Euro No fixed floating cash flow
139 No USD Yes fixed floating cash flow (2)
148 No USD Yes fixed floating cash flow (4)
154 Yes USD No fixed floating cash flow (3)
250 No Euro/USD Yes floating floating cash flow (23)
Interest rate swaps 2006
500 No Euro Yes floating fixed fair value (11)
600 Yes Euro Yes fixed floating cash flow (8)
139 No USD Yes fixed floating cash flow 1
152 Yes USD No fixed floating cash flow (5)
154 Yes USD Yes fixed floating cash flow (4)
(in € millions)

The fair value has been calculated against the relevant market The details relating to outstanding foreign exchange contracts
rates at 31 December 2007 and 31 December 2006 as per 31 December 2007 are presented below:
respectively.
At 31 December Amount in
Foreign exchange contracts Nominal Fair value Hedge equity
In 2007 TNT entered into short term foreign exchange
Foreign exchange contracts 2007
derivatives to hedge foreign exchange fair value and cash flow
risks. The fair value of these outstanding foreign exchange 461 5 Fair value 0
hedges is recorded as a current asset in ‘prepayments and 642 (9) Fair value 0
accrued income’ or as a current liability in ‘total current Foreign exchange contracts 2006
borrowings’. The foreign exchange result on the outstanding
282 3 Fair Value 0 111
fair value hedges is recorded in the income statement and Growth through networks
mitigates the foreign exchange exposure and results on the 621 (6) Fair Value 0 Annual report 2007
underlying balance sheet items. (in € millions)
CHAPTER 8
Financial
The fair value has been calculated against the relevant The cash flow hedges on highly probable forecasted Statements
market rates at 31 December 2007 and 31 December 2006 transactions denominated in foreign currency are expected to
respectively. occur at various dates during the next 12 months. Gains and
 losses recognised in the hedging reserve in equity on the To compute diluted earnings per share, the average
effective portion of the forward exchange contracts as of number of shares outstanding is adjusted for the average
31 December 2007 amount to €0 (2006: 0). These reserves are number of all potentially dilutive shares. At 31 December
recognised in the income statement in the period or periods 2007 TNT had potential obligations under stock options and
during which the hedged forecasted transaction affects the share grants to deliver 3,294,553 shares (2006: 4,553,308).
income statement. There was no difference in the income attributable to
shareholders in computing TNT’s basic and diluted
The total ineffective portion recognised in the income earnings per share.
statement that arises from the usage of fair value hedges
amounts to a profit/loss of €0 million (2006: 0 million). The For calculating basic earnings per share, an average of
total ineffective portion recognised in the income statement 383,028,938 ordinary shares is taken into account. For
that arises from the usage of cash flow hedges amounts to a calculating diluted earnings per share an average number of
profit/loss of €0 million (2006: 0 million). 385,071,986 ordinary shares is taken into account.

32 Earnings per share The following table summarises TNT’s computation related to
(No corresponding financial statement number) earnings per share and diluted earnings per share:

Year averages and numbers at 31 December 2007 2006

Number of issued and outstanding ordinary shares 379,224,255 422,767,601

Shares held by the company to cover share plans 1,716,060 2,884,441
Shares held by the company for cancellation 6,977,275 27,640,543
Average number of ordinary shares per year 383,028,938 420,701,641
Diluted number of ordinary shares per year 2,043,048 3,157,581

Average number of ordinary shares per year on fully diluted basis in the year 385,071,986 423,859,222

33 Joint ventures Year ended at 31 December 2007 2006

(No corresponding financial statement number) Non-current assets 48 54
Current assets 155 182
The company accounts for joint ventures in which TNT
and another party have equal control according to the
proportionate consolidation method. TNT’s only significant Equity 54 56
joint venture as at 31 December 2007 is the 50% interest in Non-current liabilities 77 95
Postkantoren B.V. with Postbank N.V. to operate post offices Current liabilities 72 85
in the Netherlands.

Key pro rata information regarding all of TNT’s joint ventures Net sales 339 395
in which TNT has joint decisive influence over operations is set Operating income 15 18
forth below and includes balances at 50%:
Profit attributable
to the shareholders 12 10

Net cash provided by

operating activities 5 22
Net cash used in
investing activities (3) (8)
Net cash used in
financing activities (13) (14)
Changes in cash and cash
equivalents (11) 0
(in € millions)
112
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
34 Related party transactions and balances ——Express business. The Express business provides demand
(No corresponding financial statement number) door-to-door express delivery services for customers
sending documents, parcels and freight.
The TNT group companies have trading relationships with a ——Mail business. The Mail business provides services for
number of joint ventures as well as with unconsolidated collecting, sorting, transporting and distributing domestic
companies in which TNT holds minority shares. In some cases and international mail.
there are contractual arrangements in place under which TNT ——Other networks business. The Other network business
companies source supplies from such undertakings, or such provides time-critical deliveries to individually agreed
undertakings source supplies from TNT. delivery point for business customers during the night.

During 2007, sales made by TNT companies to its joint ventures Although the Other networks business does not meet the
amounted to €18 million (2006: 8). Purchases of TNT from joint quantitative thresholds as required by IFRS 8, management
ventures amounted to €83 million (2006: 103). The net concluded that this segment should be reported, as this
amounts due to the joint venture entities amounted to €65 segment has its own network apart from the Express and
million (2006: 58). As at 31 December 2007, no material Mail business and falls under the responsibility of the Chief
amounts were payable by TNT to associated companies. Financial Officer.

The measure of profit and loss and assets and liabilities is

35 Segment information based on the TNT Group Accounting Policies which are
(No corresponding financial statement number) compliant with IFRS.
The presentation of segment information in the consolidated
financial statements is presented from a product perspective. The pricing of intercompany sales is done at arms’ length.
The Board of Management receives operational and financial
information on a monthly basis which is primarily based on the Segmentation – results
different products and customer solutions TNT offers. In the table below a reconciliation is presented of the segment
In addition, segment information from a geographical information relating to the income statement of the
perspective has been presented to give an overview of the reportable segments.
main markets. TNT distinguishes between the following
three reportable segments:
Other Inter- Non-
Year ended at 31 December 2007 Express Mail networks company allocated Total
Net sales 6,434 4,197 251 3 10,885
Inter-company sales 14 11 2 (27)
Other operating revenues 103 26 3 132
Total operating revenues 6,551 4,234 256 (27) 3 11,017
Other income 9 64 2 75
Depreciation/impairment property,
plant and equipment (163) (108) (2) (3) (276)
Amortisation/impairment intangibles (46) (27) (73)
Total operating income 599 626 11 (44) 1,192
Net financial income/(expense) (94)
Results from investments in associates 1
Income tax (316)
Profit/(loss) from discontinued operations 206
Profit for the period 989
Attributable to:
Minority interests 3
Equity holders of the parent 986

Number of employees 75,032 84,929 1,385 236 161,582

(in € millions, except employees)

Taxes and net financial income are dealt with at group level and These exceptional items are non-cash movements. Other
113
not within the reportable segments. As a result this information material non-cash items are the pension costs of €45 million Growth through networks
is not presented as part of the reportable segments. The key with in Mail division (2006: 120). Annual report 2007
financial performance indicator for management of the
CHAPTER 8
reportable segments is operating income, which is reported on In 2006 the decision was taken to divest the freight Financial
a monthly basis to the chief operating decision makers. management business and in 2005 to divest the logistics Statements
business. As a consequence the discontinued business was not
The material exceptional items in the 2007 income statement included in the segment information shown.
are the restructuring charges of €110 million and the onerous
contract provision of €23 million within the Mail division.
 Other Inter- Non-
Year ended at 31 December 2006 Express 2 Mail networks 2 company allocated Total
Net sales 5,672 4,025 250 1 9,948
Inter-company sales 7 8 5 (20)
Other operating revenues 79 32 1 112
Total operating revenues 5,758 4,065 256 (20) 1 10,060
Other income 4 58 2 1 65
Depreciation/impairment property,
plant and equipment (140) (107) (2) (6) (255)
Amortisation/impairment intangibles (35) (28) 1 (1) (63)
Total operating income 1 560 761 7 (52) 1,276
Net financial income/(expense) (47)
Results from investments in associates (6)
Income tax (395)
Profit/(loss) from discontinued operations (157)
Profit for the period 671
Attributable to:
Minority interests 1
Equity holders of the parent 670

Number of employees 52,638 84,731 1,422 431 139,222

(in € millions, except employees)
1 – The segmenting has been adjusted for €13 million regarding the revised allocation of the non-allocated costs to Express using the actual incurred costs in 2007.
2 – Figures have been adjusted to reflect the transfer of Innight from Express to Other networks in 2007.

In 2007, non-allocated operating costs amounted to €44 million Year ended at 31 December
(2006: 52). Included in these costs was €13 million (2006: 14) Non-allocated operating income 2007 2006
for business initiatives, which mainly related to investigations to
Business initiatives (13) (14)1
optimise TNT’s network strategy introduced in 2005 and costs
relating to an initiative to further drive value “below the line”. World Food Programme (10) (8)
Costs made to support the World Food Programme (WFP) and Other costs (21) (30)
Planet Me amounted to €10 million (2006: 8). Included in the
costs for the WFP were costs for knowledge transfer, hands on
support, raising awareness and funds for the WFP including Total (44) (52)
cash donations. Planet Me is a TNT initiative to have an active (in € millions)
1 – The segmenting has been adjusted for €13 million regarding the revised allocation of the
contribution to reduce CO2 emissions to avoid further global non-allocated costs to Express using the actual incurred costs in 2007.
warming. The other costs were €21 million (2006: 30), which
represent a decrease of €9 million mainly related to lower costs
for tax investigations.

Balance sheet information

Below a reconciliation is presented of the segment information
relating to the balance sheet of the reportable segments.

Other Non-
At 31 December 2007 Express Mail networks allocated Total
Goodwill paid in the year 236 20 256
Intangible assets 1,748 330 43 (2) 2,119
Capital expenditure on property, plant and equipment 315 73 2 390
Property, plant and equipment 1,162 609 8 6 1,785
114
Growth through networks Investments in associates 2 1 80 83
Annual report 2007
Accounts receivable 1,147 441 35 33 1,656
CHAPTER 8 Total assets 1 4,504 1,622 95 864 7,085
Financial
Statements Total liabilities 1,483 1,113 27 2,511 5,134
(in € millions)
1 – Identifiable assets also used for the segments have been allocated on the basis of estimated usages.
The capital expenditure relating to intangible assets amount to
€69 million for Express (2006: 64) and €26 million for Mail
(2006: 0) and nil for Other networks (2006:0).

The balance sheet information at 31 December 2006 is as

follows:

Other Non-
At 31 December 2006 Express 1 Mail networks 1 allocated Total
Goodwill paid in the year 58 41 99
Intangible assets 1,437 301 43 4 1,785
Capital expenditure on property, plant and equipment 327 84 2 4 417
Property, plant and equipment 1,008 651 7 12 1,678
Investments in associates 1 1 56 58
Accounts receivable 992 415 33 121 1,561
Total assets 2 3,912 2,111 94 691 6,808
Total liabilities 3
1,351 1,880 37 1,532 4,800
(in € millions)
1 – Figures have been adjusted to reflect the transfer of Innight from Express to Other networks in 2007.
2 – Identifiable assets also used for the segments have been allocated on the basis of estimated usages. The impact of TNT’s discontinued freight management operations is included in the
non-allocated segment. The changed presentation method for the pensions as introduced in 2007 has resulted in de €500 million grossing-up impact on the assets and liabilities.
3 – Includes all liabilities (non-current, current). The impact of TNT’s discontinued freight management operations is included in the non-allocated segment.

Geographical segment information

The segment information from a geographical perspective is
derived as follows:
——the basis of allocation of net sales by geographical areas is
the country or region in which the entity recording the sales
is located;
——segment assets and investments are allocated to the
location of the assets, except for TNT goodwill which is not
allocated to other countries or regions.

Year ended at 31 December 2007 2006

Europe
The Netherlands 3,619 3,633
United Kingdom 1,599 1,349
Italy 825 774
Germany 1,041 950
France 703 649
Belgium 300 277
Rest of Europe 1,158 1,130
Americas
USA and Canada 52 74
Brazil 244 15
South & Middle America 32 28
Africa & the Middle East 103 89
Australia & Pacific 478 442
Asia
115
China and Taiwan 447 288 Growth through networks
India 77 51 Annual report 2007

Rest of Asia 207 199 CHAPTER 8

Financial
Statements
Total net sales 10,885 9,948
(in € millions)
 The location of the total assets of TNT at 31 December 2007
and the capital expenditures (including finance leases) in 2007
were as follows:
Property, Other Capital
Intangible plant and Financial Pension Trade current Total expenditures
At 31 December 2007 assets equipment fixed assets assets receivables assets assets assets
Europe
The Netherlands 1 1,016 655 108 594 256 263 2,892 96
United Kingdom 188 410 5 232 100 935 111
Italy 48 35 34 270 61 448 18
Germany 133 79 61 110 49 432 30
France 287 71 11 106 29 504 19
Belgium 31 324 3 65 53 476 142
Rest of Europe 70 60 11 182 110 433 27
Americas
USA and Canada 2 34 6 8 50 1
Brazil 167 35 1 23 13 239 7
South & Middle America 2 1 9 4 16 2
Africa & the Middle East 3 4 24 16 47 2
Australia & Pacific 21 74 48 51 14 208 15
Asia
China and Taiwan 117 20 1 69 28 235 10
India 34 3 1 15 14 67 1
Rest of Asia 4 11 6 34 38 93 6

Total 2,119 1,785 325 594 1,452 800 7,075 487

(in € millions)
1 – Including the goodwill arising from the acquisition of TNT Ltd/GD Express Worldwide by Royal Nederland N.V.

The location of the total assets of TNT at 31 December 2006

and the capital expenditures (including finance leases) in 2006
were as follows:
Property, Other Capital
Intangible plant and Financial Pension Trade current Total expenditures
At 31 December 2006 assets equipment fixed assets assets receivables assets assets assets
Europe
The Netherlands 1 1,005 692 104 500 255 238 2,794 108
United Kingdom 168 464 212 98 942 176
Italy 45 36 36 223 63 403 17
Germany 117 64 125 103 51 460 19
France 287 66 12 107 48 520 16
Belgium 31 202 4 52 29 318 124
Rest of Europe 67 52 8 175 147 449 22
Americas
USA and Canada 3 1 12 6 22 2
South & Middle America 1 2 1 11 13 28 1
Africa & the Middle East 2 4 21 13 40 4
Australia & Pacific 21 70 16 50 9 166 13

116 Asia
Growth through networks China and Taiwan 5 8 53 46 112 9
Annual report 2007
India 35 4 2 11 12 64 4
CHAPTER 8
Financial Rest of Asia 1 11 5 34 30 81 5
Statements

Total 1,785 1,678 314 500 1,319 803 6,399 520

(in € millions)
1 – Including the goodwill arising from the acquisition of TNT Ltd/GD Express Worldwide by Royal Nederland N.V.
The location of employees at year end is as follows:

Other Non-
Express Mail networks allocated 2007 2006
Europe
The Netherlands 2,734 58,991 207 234 62,166 61,269
United Kingdom 11,977 932 12,909 12,504
Italy 3,171 1,363 4,534 4,284
Germany 4,351 14,245 967 19,563 20,473
France 4,871 27 1 4,899 4,717
Belgium 2,445 601 40 3,086 2,939
Rest of Europe 8,304 8,648 171 17,123 16,607
Americas
USA and Canada 793 51 844 960
Brazil 6,428 6,428 201
South & Middle America 549 549 448
Africa & the Middle East 1,561 8 1,569 1,514
Australia & Pacific 4,935 4,935 5,011
Asia
China and Taiwan 16,628 63 1 16,692 2,619
India 2,395 2,395 2,399
Rest of Asia 3,890 3,890 3,277

Total 75,032 84,929 1,385 236 161,582 139,222

Including temporary employees on TNT’s payroll. The 2006 numbers have been adjusted for comparative purposes.

36 Subsequent events TNT Post is supporting trade union efforts towards achieving a
(No corresponding financial statement number) minimum wage that reflects the cost of living and the
competitive position of companies in the national and
Repurchase programme international markets. Since 1 January 2008, TNT Post has
On 4 January 2008, the company completed a first €200 million been subject to the collective labour agreement of the
tranche (announced on 9 November 2007) of the €500 million employers’ association for new postal and delivery services
share buy-back programme announced on 30 July 2007. TNT (Arbeitgeberverband Neue Brief- und Zustelldienste).
repurchased a total of 6,977,275 shares of this first tranche in
2007 and 208,419 shares with a total value of €6 million in 2008. The contended regulation passed by the German Federal
Ministry of Labour and Social Affairs has set the minimum wage
On 6 December 2007, TNT announced the start of the second negotiated between the trade union ver.di and the employers’
€100 million tranche of the €500 million share repurchase association for postal services. The measure, which has made
programme and completed the buy back of this tranche on the minimum wage generally binding for all companies in the
15 February 2008. TNT repurchased a total of 3,849,210 shares postal and delivery services sector, has produced a conflict
of this second tranche in 2008. It is TNT’s intention to cancel between two collective labour agreements. In view of fair
the shares repurchased under the €500 million share buy-back competition in the postal market, the generally binding validity
programme. A proposal for such cancellation will be included of the minimum wage agreement of the employers’ association
in the agenda of the annual general meeting of shareholders for postal services is unacceptable to TNT Post since it
of 2008. would seriously jeopardise the liberalisation of the German
mail market and TNT’s ability to build a sustainable
TNT Post Germany profitable business.
On 21 January 2008 two subsidiaries of TNT Post Germany
117
instituted preliminary legal proceedings with the Administrative By instituting legal proceedings TNT aims to secure legal Growth through networks
Court (Verwaltungsgericht) in Berlin to obtain an injunctive relief certainty for its EMN German operations which employ in total Annual report 2007
(einstweiligen Anordnung) to suspend the generally binding around 14,000 employees and earned €233 million of revenue
CHAPTER 8
minimum wage in the postal services sector as adopted by the at an operating loss of €31 million in 2007. So far in total TNT Financial
Federal Ministry of Labour and Social Affairs on 28 December has invested around €80 million in Germany as part of its Statements
2007. TNT has taken the position that this minimum strategy to become the number one challenger to incumbent
wage is unconstitutional. European mail operators.
 37 Postal regulation and concession In addition, bulk mail of letters up to an individual weight of
(No corresponding financial statement number) 50 grammes, which are conveyed against separately agreed
rates, are part of the mandatory postal services. Mandatory
In the Netherlands, the key legislation regulating TNT’s Mail postal services also cover rental of P.O. boxes.
activities is the Dutch Postal Act. This Act requires TNT to
perform the mandatory postal services in the Netherlands, some The Postal Act does not require TNT to provide the delivery
of which are exclusive to TNT (the reserved postal services). In of bulk printed matter such as advertising, magazines and
connection with the Dutch Postal Act there is the parliamentary newspapers, the delivery of bulk letters with an individual
Postal Decree, which specifies the services that constitute the weight above 50 grammes and unaddressed mail items.
mandatory postal services and defines the scope of the reserved
postal services. The combination of these mandates and exclusive For international inbound and outbound mail, based on the
rights is commonly called the “Postal Concession”. The Postal Dutch Postal Act and in accordance with the rules of the UPU,
Concession is performed by TNT’s subsidiary Royal TNT Post B.V. mandatory postal services mainly comprise the conveyance
against payment of both postal items at standard single rates
Furthermore, there is a General Postal Regulations Decree, and of bulk mail items at separately agreed rates with a
which specifies TNT’s obligations regarding the performance of maximum individual weight of two kilogrammes and of postal
mandatory postal services and the transparency of the financial parcels with a maximum individual weight of 20 kilogrammes.
accounting of these services according to the EU Postal Directive. In addition, mandatory postal services cover the postal services
regulated by the UPU.
OPTA, the independent Supervisory Authority for Post and
Telecommunications established by the government, supervises Regulatory conditions for the
TNT’s performance of the mandatory postal services. The provision of mandatory postal services
responsibility for postal policy remains under the authority of Regarding mandatory postal services the General Postal
the Minister of Economic Affairs. Regulations Decree imposes various regulatory conditions on
TNT with respect to service provision, tariffs, cost and revenue
On 5 June 2007 the Second Chamber of Parliament adopted a accounting, financial administration and reporting. Other than
new Postal Act. This Act foresees the full liberalisation of the the mandatory postal services, none of TNT’s postal services is
Dutch postal market ahead of the EU timetable. To ensure that subject to governmental control.
the mandatory postal services are provided, the Act intends to
assign Royal TNT Post B.V. the Postal Concession. The Act will According to section 2d of the Dutch Postal Act, TNT is obliged
have to be approved by the First Chamber of Parliament before to give its competitors entrance to its P.O. boxes. This service
it enters into force. The enactment date is dependent on the has to be delivered against reasonable, objectively justifiable
condition of a level playing field in real terms on the postal and non-discriminatory conditions and remunerations. To date
markets of Germany and the United Kingdom. these conditions and remunerations are negotiated results
between parties. A similar, voluntary arrangement is made with
In December 2007, the Dutch Minister of Economic Affairs TNT’s competitors with regard to mail items of competitors
made use of the so-called ‘emergency-brake procedure’ when that enter TNT’s processes through the collection boxes.
liberalisation as of 1 January 2008 was postponed for at least
three months. The Minister based his decision on two With respect to service levels, the General Postal Regulations
arguments: First, the lack of clarity about the level playing field Decree requires TNT to provide a level of service that complies
with Germany (the effects of the introduction of a minimum with modern standards, to provide nationwide services and to
wage in the German postal sector are still unknown. In addition, perform a delivery round every day, except for Sundays and
the exemption Deutsche Post enjoys with regard to VAT public holidays. TNT is required to deliver not less than 95%
remains a barrier to competition that is still subject to debate in of all domestic letters the day after the day of posting, not
German politics). Second, in the Netherlands, new postal including Sundays and public holidays. TNT is required to
operators and the unions have been given more time to reach maintain a network of service points (letter boxes, post offices
an agreement on employment conditions. and agents) for the access of the general public to the services.
With respect to rates and conditions, TNT is required to set
In the coming months a decision of the First Chamber of rates and associated conditions that are transparent,
Parliament is expected on the Postal Act. In February the Minister non-discriminatory and uniform. However, TNT may grant
of Economic Affairs will inform the Second Chamber of volume discounts for items of correspondence and negotiate
Parliament about the status of the level playing field with Germany specific prices and conditions with high volume users. TNT is
and labour conditions in the Netherlands. During the course of further required to submit proposed rate changes to OPTA,
2008, lower legislation, i.e. the Postal Decree and General Postal which has to evaluate whether the proposed changes are in
Regulations Decree will be amended to fit the new Postal Act. accordance with the price cap system.

The postal concession The price cap system measures tariff developments in two
Mandatory postal services different baskets of services, a “total basket” and a “small users
The domestic mandatory postal services mainly consist of the basket”. The total basket comprises domestic mandatory postal
conveyance against payment of standard single rates of the services provided to all customers. The small users basket
118
Growth through networks following postal items: comprises the same services in mutual relations which are
Annual report 2007 ——letters (including reply items) and printed matter with a representative for consumers and small business users.
maximum individual weight of two kilogrammes,
CHAPTER 8
Financial ——postal parcels with a maximum individual weight of The price cap system uses a weighing factor for each service in
Statements 10 kilogrammes, and these baskets. The levels of the indices for both baskets are not
——registered, registered insured and registered value to exceed the official national index of wages for employees in
declared items. the market sector.
The price cap system was last evaluated in 2002. Since an earlier given to national postal operators over a considerable part of
decision of the Ministry of Economic Affairs to freeze the tariffs the postal market in these countries. According to the
controlled by the price cap system was declared void in June European Commission, this distorts the functioning of the
2004, TNT has remained able to amend the individual rates for Internal Market for postal services. It has launched an
mandatory postal services, subject to the provisions of the tariff infringement procedure against Germany, the United Kingdom
control system. As of 1 January 2007, after more than five and a and Sweden on this VAT issue in order to resolve it.
half years without rate changes, the rate for single-item
domestic letters up to 20 grammes was increased to €0.44.
TNT intends not to increase the €0.44 rate again until 2010.
The newly announced rates (12.1% average increase) remain
within the inflation rate of 12.5% on aggregate since 2001. The
rate increases fall within the maximum levels allowed by law,
which has been confirmed by OPTA.

Reserved postal services

Under the Dutch Postal Act and the Postal Decree, the
reserved postal services include the following exclusive rights:

——the conveyance of domestic and inbound international

letters with a maximum individual weight of 50 grammes at a
rate of less than two and a half times the standard single
rate (€0.44).
——the exclusive right to place letter boxes intended for the
public alongside or on public roads, and
——the exclusive right to issue postal stamps and imprinted
stamps bearing the likeness of the monarch and/or the
word “Nederland”.

These exclusive rights do not extend to courier services. The

exclusive rights also do not extend to the conveyance of
parcels, letters weighing in excess of 50 grammes and printed
materials such as advertising, newspapers and magazines. In
addition, the exclusive rights do not extend to the conveyance
of letters by a business to its own customers.

Accounting and other financial obligations

TNT’s obligations on reporting include the establishment of an
annual report on TNT’s performance of the mandatory postal
services. TNT’s financial accounting obligations require TNT to
maintain separate financial accounts within its internal financial
administration for mandatory postal services. This separate
accounting must be broken down into reserved postal services
and other mandatory postal services and must be separated
from the accounting of TNT’s other activities. Every year, TNT
must submit to OPTA a declaration of an independent auditor,
appointed by OPTA, that its financial accounting system
complies with these obligations. This declaration has to be
published by OPTA in the “Staatscourant”.

Underlying this accounting system and the financial reports to

OPTA is a system for allocating cost and revenues to the
different types of services. This system complies with the
accounting rules laid down in the EU Postal Directive.

Value added tax on postal services

At present, TNT is not allowed to charge value added tax (VAT)
on postal items forming part of the mandatory postal services.
The flip side of this is that for mandatory postal services TNT
cannot deduct the VAT amounts paid on its purchases of
services and goods related to the mandatory services. TNT is
119
required to charge VAT on all services not included in the Growth through networks
mandatory services, i.e. the services in competition with other Annual report 2007
operators. Competitors are required to charge VAT on those
CHAPTER 8
items as well. Therefore, in the Netherlands there is a level Financial
playing field for competitors and TNT on these services. In Statements
most other Member States of the European Union the scope of
mandatory services is very large. Hence a VAT-exemption is
 TNT N.V. corporate balance sheets
At 31 December
Before proposed appropriation of profit 2007 variance % 2006
Assets
Non-current assets
Investments in group companies 4,250 3,672
Investments in associates 77 56
Financial fixed assets at fair value 11
Deferred tax assets 1 5
38 Total financial fixed assets 4,339 16.2 3,733
39 Pension asset 631 27.5 495

Total non-current assets 4,970 17.5 4,228

Current assets
Accounts receivable from group companies 5 97
Other accounts receivable 1 30
Cash and cash equivalents 7 16

Total current assets 13 (90.9) 143

Total assets 4,983 14.0 4,371

Liabilities and equity

40 9 Shareholders equity
Issued share capital 182 203
Additional paid in capital 982 1,245
Cumulative translation adjustment (82) (5)
Hedge reserves (22) (21)
Unappropriated profit 871 561

Total shareholders' equity 1,931 (2.6) 1,983

Non-current liabilities
13 Long term debts 1,019 1,004
Total non-current liabilities 1,019 1.5 1,004

Current liabilities
Accounts payable to group companies 1,289 1,292
Short term provision 44 47
41 Other current liabilities 671 33
Accrued current liabilities 29 12

Total current liabilities 2,033 46.9 1,384

Total liabilities and equity 4,983 14.0 4,371

(in € millions, except percentages)
— the figures in the line items of these financial statements refer to the notes to the financial statements.
— the accompanying notes form an integral part of the financial statements.

TNT N.V. corporate statements of income

Year ended at 31 December 2007 2006
120 Results from continuing operations 720 806
Growth through networks Results from discontinued operations 206 (70)
Annual report 2007

CHAPTER 8 Results from investments in group companies after taxes 926 736
Financial Other income and expenses after taxes 60 (66)
Statements
Profit attributable to the shareholders 986 670
(in € millions)
Notes to the corporate
balance sheets and
statements of income
Accounting policies for valuation and
determination of result TNT N.V.
The corporate financial statements for the year ended at 31
December 2007 have been prepared in accordance with Part 9
of Book 2 of the Dutch Civil Code. TNT has applied the option
in Article 362 (8) to use the same principles of valuation and
determination of result for the corporate financial statements
as the consolidated financial statements. As a result TNT’s
investments in group companies are carried at net asset value.
For the principles of valuation of assets and liabilities and for the
determination of results reference is made to the notes to the
consolidated balance sheet and statements of income.

38 Total financial fixed assets: 4,339 million (2006: 3,733)

Investments Financial fixed

Statement of changes in group Investments in Deferred tax assets at
financial fixed assets companies associates assets fair value Total
Balance at 31 December 2005 4,428 43 5 4,476

Changes in 2006
Results 736 (6) 730
Acquisitions/additions 647 19 666
Disposals/decreases (2,138) (2,138)
Withdrawals/repayments
Exchange rate differences (1) (1)
Other changes

Total changes (756) 13 (743)

Balance at 31 December 2006 3,672 56 5 3,733

Changes in 2007
Results 926 (5) 921
Acquisitions/additions 192 26 15 233
Disposals/decreases (459) (4) (13) (476)
Withdrawals/repayments
Exchange rate differences (81) (81)
Other changes 9 9

Total changes 578 21 (4) 11 606

121
Balance at 31 December 2007 4,250 77 1 11 4,339 Growth through networks
Annual report 2007
(in € millions)
CHAPTER 8
Financial
Statements
 39 Pension asset: 631 million (2006: 495) payable for the period in their financial statements. For TNT
TNT N.V. is the sponsoring employer for two Dutch pension N.V. the contributions received from other group entities offset
plans, which are externally funded and are covering the majority the pension expense. The impact of the contributions is
of TNT’s employees in the Netherlands. In accordance with represented as participant contributions in the table below,
IAS19.34a the net defined benefit cost is recognised in the which also reconciles the opening and closing balances of the
corporate financial statements of TNT N.V. the other group present value of the defined benefit obligation and the fair value
companies recognise the costs equal to the contribution of plan assets for the TNT N.V. sponsored group pension plans.
For additional details on the Dutch pension plans, see note 10.

2007 2006
Change in benefit obligation
Benefit obligation at beginning of year (4,468) (4,502)
Service costs (119) (137)
Interest costs (214) (198)
Amendments 0 8
Prior service costs/termination benefit costs 0 0
Curtailments/settlements 0 9
Actuarial (loss)/gain 701 271
Benefits paid 90 81

Benefit obligation at end of year (4,010) (4,468)

Change in plan assets

Fair value of plan assets at beginning of year 4,602 4,179
Actual return on plan assets 104 382
Participant contributions 105 122
Benefits paid (90) (81)

Fair value of plan assets at end of year 4,721 4,602

Funded status as per 31 December

Funded status 711 134
Unrecognised net actuarial loss (114) 322
Unrecognised prior service costs 34 39

Pension assets 631 495

Components of employer pension expense

Service costs (119) (137)
Interest costs (214) (198)
Expected return on plan assets 369 342
Amortisation of actuarial loss (1) (24)
Curtailment gain 0 8
Other costs (3) (1)
Participant contributions 105 122

Total post employment benefit income/(expenses) 137 112

122
Growth through networks Weighted average assumptions as at 31 December
Annual report 2007
Discount rate 5.7% 4.7%
CHAPTER 8
Financial Expected return on plan assets 7.9% 7.9%
Statements
Rate of compensation increase 2.0% 2.0%
Rate of benefit increase 2.0% 2.0%
(in € millions, except percentages)
40 Equity: 1,931 million (2006: 1,983)

Issued Additional Total

share paid in Translation Hedging Other Retained shareholders'
capital capital reserve reserve reserves earnings equity
Balance at 31 December 2005 230 1,421 (16) (12) 1,080 559 3,262
Profit for the period 670 670
Gains/(losses) on cashflow hedges, net of tax (9) (9)
Currency translation adjustment (1) (1)

Total recognised income for the year (1) (9) 670 660
Final dividend previous year (173) (173)
Appropriation of net income 386 (386) 0
Interim dividend current year (109) (109)
Repurchases of shares / cancellation (27) (176) (1,533) (1,736)
Share based compensation 13 13
Other 12 54 66

Total direct changes in equity (27) (176) 12 (1,080) (668) (1,939)

Balance at 31 December 2006 203 1,245 (5) (21) 561 1,983

Profit for the period 986 986

Gains/(losses) on cashflow hedges, net of tax (1) (1)
Currency translation adjustment (81) (81)

Total recognised income for the year (81) (1) 986 904
Final dividend previous year (183) (183)
Appropriation of net income 378 (378) 0
Interim dividend current year (115) (115)
Repurchases of shares / cancellation (21) (263) (423) (707)
Share based compensation 14 14
Other 4 31 35

Total direct changes in equity (21) (263) 4 (676) (956)

Balance at 31 December 2007 182 982 (82) (22) 871 1,931

(in € millions)

The translation and hedging reserves are legal reserves.

The total amount of these legal reserves amount to
-€104 million (2006: 26) which limits the dividend distribution
for this amount. For additional details on equity, see note 9.

123
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 41 Other current liabilities 44 S ubsidiaries and associated companies
The other current liabilities of €671 million as of 31 December at 31 December 2007
2007 include the nominal value of the 5.125% Eurobond of (No corresponding financial statement number)
€637 million, see note 13 and 31.
The full list containing the information referred to in article 379
42 Wages and salaries and article 414, Book 2 of the Dutch Civil Code is filed at the
(No corresponding financial statement number) office of the Chamber of Commerce in Amsterdam.

TNT N.V. does not have any employees. Hence no salary and Amsterdam, 18 February 2008
social security costs were incurred. In accordance with
IAS19.34 the net defined benefit cost shall be recognised in the
corporate financial statements of TNT N.V., for further
Board of Management
information on pension costs see note 39. M.P. Bakker (Chairman)
C.H. Van Dalen
43 Commitments not included in the balance sheet H.M. Koorstra
(No corresponding financial statement number) M.C. Lombard

Declaration of joint and several liability

As at 31 December 2007 TNT N.V. has issued a declaration of
Supervisory Board
joint and several liability for some of its group companies in J.H.M. Hommen (Chairman)
compliance with article 403, Book 2 of the Dutch Civil Code. R.J.N. Abrahamsen
Those group companies are: M. Harris
——Koninklijke TNT Post B.V. R. Dahan
——TNT Holdings B.V. V. Halberstadt
——TNT Express Holdings B.V. G. Kampouri Monnas
——TNT Head Office B.V. R. King
W. Kok
Fiscal unity in the Netherlands S. Levy
TNT N.V. forms a fiscal unity with several Dutch entities for R.W.H. Stomberg
corporate income tax and VAT purposes. The full list of Dutch
entities which are part of the fiscal unity is included in the list
containing the information referred to in article 379 and article
TNT N.V.
414, Book 2 of the Dutch Civil Code, which is filed at the office Neptunusstraat 41-63
of the Chamber of Commerce in Amsterdam. A company and 2132 JA Hoofddorp
its subsidiaries that form part of the respective fiscal unities P.O. Box 13000
are jointly and severally liable for taxation payable by these 1100 KG Amsterdam
fiscal unities. The Netherlands

Guarantees
Parental support in the form of a guarantee has been provided
by TNT N.V. relating to its subsidiary TNT Finance B.V. for a
syndicated loan (€1,000 million), various loan facilities including
a €1,000 million commercial paper programme, €175 million
cash pooling credit facility and for various international swaps
and derivatives association (ISDA) agreements.

TNT N.V. issued corporate guarantees for two of its

subsidiaries amounting to €34 million.

A further guarantee of €20 million was issued for a credit

facility of TNT China Holdings Co. LTD., which is an indirect
subsidiary of the company.

Parental support in the form of a letter of guarantee and a

subscription letter has been provided by TNT Holdings B.V.
to its indirect subsidiary TNT Pty. Ltd. in relation to a capital
reduction of TNT Pty. Ltd. in 1999.

Parental support in the form of an indemnity has been provided

124
Growth through networks by TNT N.V. to its indirect subsidiary TNT Holdings (UK) Ltd.
Annual report 2007 and its subsidiaries in connection with the acquisition of TNT
PTY Ltd. in 1996 and the financing of this acquisition and as a
CHAPTER 8
Financial result of the restructuring of the group in the course of 1997 as
Statements a direct consequence of this acquisition.
45 Other information Opinion with respect to the
consolidated financial statements
To the General Meeting of Shareholders of TNT N.V. In our opinion, the consolidated financial statements, set out on
pages 62 – 119, give a true and fair view of the financial position
Auditor’s report of TNT N.V. as at 31 December 2007, and of its result and its
cash flow for the year then ended in accordance with
Report on the financial statements International Financial Reporting Standards as adopted by the
We have audited the financial statements over 2007 of TNT European Union and with Part 9 of Book 2 of the Netherlands
N.V., Amsterdam, set out on pages 62 – 124. These financial Civil Code.
statements consist of the consolidated financial statements and
the corporate financial statements. The consolidated financial Opinion with respect to the
statements comprise the consolidated balance sheet as at corporate financial statements
31 December 2007, consolidated statement of income, In our opinion, the corporate financial statements, set out on
consolidated cash flow statement and consolidated statement pages 120 – 124, give a true and fair view of the financial position
of changes in total equity for the year then ended, and a of TNT N.V. as at 31 December 2007, and of its result for the
summary of significant accounting policies and other year then ended in accordance with Part 9 of Book 2 of the
explanatory notes. The corporate financial statements Netherlands Civil Code.
comprise the corporate balance sheet as at 31 December 2007,
the corporate statement of income for the year then ended Report on other legal and regulatory requirements
and the notes. Pursuant to the legal requirement under 2:393 sub 5 part e of
the Netherlands Civil Code, we report, to the extent of our
Board of Management’s responsibility competence, that the report of the Board of Management set
The Board of Management of the company is responsible for out on pages 6 – 37 and pages 42 – 53, is consistent with the
the preparation and fair presentation of the financial statements financial statements as required by 2:391 sub 4 of the
in accordance with International Financial Reporting Standards Netherlands Civil Code.
as adopted by the European Union and with Part 9 of Book 2 of
the Netherlands Civil Code, and for the preparation of the Amsterdam, 18 February 2008 —
Report of the Board of Management set out on pages 6 – 37 PricewaterhouseCoopers Accountants N.V.
and pages 42 – 53 in accordance with Part 9 of Book 2 of the
Netherlands Civil Code. This responsibility includes: designing, Originally signed by drs. M. de Ridder RA
implementing and maintaining internal control relevant to the
preparation and fair presentation of the financial statements
that are free from material misstatement, whether due to fraud
or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the
circumstances.

Auditor’s responsibility
Our responsibility is to express an opinion on the financial
statements based on our audit. We conducted our audit in
accordance with Dutch law. This law requires that we comply
with ethical requirements and plan and perform our audit to
obtain reasonable assurance whether the financial statements
are free from material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the company’s internal control. An audit
also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates
made by the Board of Management, as well as evaluating the
125
overall presentation of the financial statements. Growth through networks
Annual report 2007
We believe that the audit evidence we have obtained
CHAPTER 8
is sufficient and appropriate to provide a basis for our Financial
audit opinion. Statements
 Extract from the articles Special control rights under
of association on the articles of association
appropriation of profit On 17 November 2006, the State of the Netherlands
transferred the special share in the company to TNT for free.
Under TNT’s current articles of association, the dividend As part of that transaction TNT agreed not to exercise the
specified in article 35, paragraph 1 will be paid on the rights attached to this special share or transfer this share to
preference shares B if outstanding. Subject to the approval a third party pending conversion of the special share into an
of TNT’s Supervisory Board, the Board of Management will ordinary share. The special share was converted into an
determine which part of the profit remaining after payment ordinary share as part of an amendment to the articles of
of dividend on any preference shares B will be appropriated to association. As a result the special share ceased to exist on
the reserves (article 35, paragraph 2). The remaining profit after 27 April 2007, the date on which the amendment of the
the appropriation to reserves shall be at the disposal of the articles of association became effective.
general meeting of shareholders (articles 35, paragraph 3).
No dividends shall be paid on shares held by TNT in its
own capital (article 35, paragraph 6).
Group companies
Preference shares B have not been issued.
of TNT N.V.
The list containing the information referred to in article 379 and
Appropriation of profit article 414 of Book 2 of the Dutch Civil Code is filed at the
office of the Chamber of Commerce in Amsterdam.
Subject to the adoption of TNT’s financial statements by the
annual general meeting of shareholders, the proposed 2007
dividend has been set at €0.85 in cash per ordinary share of
Subsequent events
€0.48 par value. After adjusting for the interim dividend of For information relating to subsequent events, see note 36.
€0.30 per ordinary share paid out in August 2007, the final
dividend will be €0.55 per ordinary share.

Appropriation of profit 2007

Profit attributable to the shareholders 986
Appropriation in accordance with the articles of
association:
Reserves adopted by the Board of
Management and approved by the
Supervisory Board (article 35, par.2) (670)

Dividend on ordinary shares 316

Interim dividend paid 115

Final dividend 201

(in € millions)

126
Growth through networks
Annual report 2007

CHAPTER 8
Financial
Statements
 other than factually, by the company. For further information
visit TNT’s corporate website at group.tnt.com.

investor
TNT does not pay any fee(s) to parties for carrying out research
for analysts’ reports or for the production or publication of
analysts’ reports with the exception of credit rating agencies.

relations,
The Board of Management has adopted investor relations and
media guidelines with which all members of the Board of
Management must at all times abide unless explicitly exempted
by the CEO.

shares, Contacts with the capital markets are dealt with by the
members of the Board of Management, TNT’s investor
relations professionals, and from time to time other TNT

dividend and
personnel specially mandated by the Board of Management.

The corporate website provides all information that is required

to be published as well as access to shareholders’ circulars

shareholder
required for any approvals sought from the general meeting
of shareholders.

The corporate website provides a summary of the resolutions

returns
of the general meetings of shareholders. The votes cast in
relation to all resolutions are disclosed to the persons attending
the meeting and the results of the voting are also published
on this website.
2007 —
Annual report As announced on 25 May 2007, TNT established that the
benefits of its listing on the New York Stock Exchange (NYSE)
and US registration had declined over time and that the costs
and requirements for the listing were not justified by the low
trading volume in its shares. As a result, on 18 June 2007 TNT
delisted its American Depositary Receipts from the NYSE.
General As of that date TNT’s ordinary shares have been listed on
Euronext Amsterdam only. Also on 18 June 2007, TNT filed
TNT aims to explain its strategy, business developments and a Form 15-F with the United States Securities and Exchange
financial results to investors. The CFO has the principal Commission to deregister and terminate its reporting
responsibility for investor relations with the active involvement obligations under the US Securities Exchange Act of 1934.
of the CEO. The Investor Relations department organises By operation of law, TNT’s deregistration became effective
presentations for analysts and institutional and retail investors, 90 days after the filing, i.e. on 16 September 2007.
which can be viewed on the company’s corporate website.
TNT is included in the AEX index, which normally consists of
TNT’s policy is to provide shareholders and other parties in the the top 25 companies in the Netherlands, ranked on the basis
financial markets with equal and simultaneous information of their turnover in the stock market and free float.
about matters that may influence the share price. The contacts
between the Board of Management on the one hand and press In 2007, 611 million TNT shares were traded on Euronext
and analysts on the other are carefully handled and structured, Amsterdam (2006: 511 million).
and the company will not engage in any acts that compromise
the independence of analysts in relation to the company and
vice versa. Briefings on quarterly results are given either via
group meetings or teleconference and are both accessible by
telephone or via the corporate website. Briefings are similarly
given to update the market after each quarterly announcement.
Briefing meetings with institutional shareholders may be held to
ensure that the investment community receives a balanced and
complete view of the company’s performance and the issues
faced by the business. In addition, TNT communicates with all
of its shareholders and investors through the publication of the
127
annual report, general meetings of shareholders, newsletters, Growth through networks
press releases and the company’s corporate website. Analyst Annual report 2007
meetings can by way of webcasting at all times be reviewed by
CHAPTER 9
shareholders. The corporate website provides all relevant Investor relations, shares,
information with regard to dates of analyst meetings and dividend and shareholder returns
procedures concerning webcasting. Analysts’ reports and
valuations are not assessed, commented upon or corrected,
 Share performance
2007 2006
Stock price (in €)
High 36.08 32.62
Low 25.67 26.30
Close 28.25 32.58
Earnings per outstanding share (in € cents) 257.4 159.3
Dividend (in € cents) 85.0 1 73.0
Dividend pay-out ratio (as a %) 33.0 45.8
Dividend yield (based on closing rate for the year) 3.01 2.24
P/E Ratio 10.98 20.45
Number of issued ordinary shares 379,224,255 422,767,600
Stock market capitalisation (in € billions) 10,713 13,774
Adjusted stock market capitalisation (in € billions) 2
10,467 12,779
1 – Based on the estimated outstanding number of ordinary shares per mid April 2008.
2 – Adjusted for shares held by the company for cancellation.

Relative performance to Euronext Amsterdam (AEX) at Relative performance to Euronext Amsterdam (AEX) at closing
closing prices during 2007 (AEX index rebased to TNT): prices since listing in 1998 (AEX index rebased to TNT):

Annual relative performance to Annual relative performance to

Euronext Amsterdam (AEX) Euronext Amsterdam (AEX)

40 40
35
35 30
25
30 20
15
25 10
5
20 0

Jan Feb Mrt Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

TNT TNT
AEX AEX

The following table indicates the form in which the ordinary

shares were held as at 31 December 2007. Dividend TNT
Percentage of TNT tries to meet shareholders’ return requirements through
outstanding growth in value of the company’s shares, dividends, and
Form Number of shares ordinary shares incidental share repurchases. As part of its dividend guidelines,
Bearer shares 362,447,180 95.58% TNT intends to pay interim and final dividends in cash annually.
The TNT Reserves and Dividend Guidelines can be viewed on
Non-ADS
registered shares 1,603 0.00% TNT’s corporate website. During 2007 TNT announced its
intention to increase the dividend pay-out from around 35%
ADSs 1 16,775,472 4.42% of normalised net income currently to around 40% by 2010.
128
Growth through networks 1 – Held by approximately 39 holders of record. Since some shares are held by brokers and Normalised net income is defined as “profit attributable to the
Annual report 2007 other nominees for their clients, this number may not be representative of the actual
number of ordinary shares held by US residents or of the actual number of US resident equity holders of the parent” adjusted for significant one time
CHAPTER 9
beneficial holders of ordinary shares. and special items.
Investor relations, shares,
dividend and shareholder returns
ADSs are now so called “level 1” shares and are not listed on
the NYSE but traded on the over-the-counter market.
Dividend TNT per share (in € cents) Repurchase of shares/share
100 buy-back programmes
90 85 1 The reduction of the issued share capital to its current amount
80 was effected on respectively 5 July 2007 following completion in
73
70 February 2007 of the €1,000 million share buy-back programme
63
60 57 announced on 6 November 2006 and on 29 November 2007
48 following the completion in September 2007 of the €400 million
50
40 share buy-back programme announced on 26 February 2007.
40 36 38

30 For further information on the repurchase of shares in 2007,

20 see also note 9 to the consolidated financial statements.
10
On 30 July 2007, a new share buy-back programme of up to
0 €500 million was announced. A first tranche of €200 million
2000 2001 2002 2003 2004 2005 2006 2007
was commenced 9 November 2007 and was completed on
1 — The final dividend is based on the estimated outstanding 4 January 2008. A further tranche of €100 million was started
number of ordinary shares per mid April 2008 on 7 January 2008 and is expected to be completed by February
2008. The remaining €200 million is expected to be completed
by mid 2008. A proposal to cancel the shares repurchased
under this new share buy-back programme will be part of
the agenda of the annual general meeting of shareholders in
April 2008.
Share capital and shares
TNT’s authorised share capital is divided into 1,600,000,000
shares of €0.48 each and consists of 800,000,000 ordinary
Major shareholders
shares and 800,000,000 preference shares B. On 31 December Since most of the ordinary shares are in bearer form, the
2007, 379,224,255 ordinary shares were issued and outstanding analyses of shareholdings by region and investor type are
and no preference shares B were issued and outstanding. estimates based on the limited information available to TNT
For more information on TNT’s equity, see note 9 to the through market sources. These estimates as of 31 December
consolidated financial statements. 2007 and expressed as a percentage of total shares outstanding
(excluding shares held by the company) on that date, are:

4% Other 11% Netherlands 5% Private investors

35% North America 24% United Kingdom

26% Other Europe 95% Institutional Other

On 26 July 2007, TNT received notification from the The Financial Markets Supervision Act imposes a duty to
Netherlands Authority for the Financial Markets (AFM) that disclose percentage holdings in the capital and/or voting rights
it had received disclosures of a substantial holding in the in the company when such holding reaches, exceeds or falls
company by Morgan Stanley & Co International Plc. under the below 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and
129
Netherlands Financial Markets Supervision Act (Wet op het 95%. Such disclosure must be made to the AFM without delay Growth through networks
financieel toezicht). This substantial holding in the company which then notifies the company. Annual report 2007
was subsequently step by step reduced to below 5% as of 9
CHAPTER 9
August 2007. More information can be found on the website Investor relations, shares,
of the AFM under notifications substantial holdings. dividend and shareholder returns
 Other information Financial calendar for 2008
Peer group Total Shareholder
18 February Announcement of 2007 fourth quarter and
Return comparison 2007 full year results
For comparative reasons, the company has defined a peer 11 April TNT annual general meeting of shareholders
group of publicly listed companies with activities in the same 15 April Final ex-dividend listing (payment: 22 April 2008)
industries in which TNT is active. This peer group consists of 28 April Publication of 2008 first quarter results
the Germany-based company Deutsche Post, with activities in
mail, express and logistics, the Austrian Oesterreichische Post, 28 July Publication of 2008 second quarter results
provider of mail and parcel services, as well as the two United 27 October Publication of 2008 third quarter results
States-based express carriers FedEx and United Parcels
Services. For this peer group, the comparative performance
in terms of total shareholder returns in 2006 and 2007 is
charted below.
Publications
Share is a quarterly magazine distributed to 13,000 individual
2007
shareholders and other interested readers. This magazine and
other publications can also be viewed and ordered through the
35
corporate website.
25

15
Websites
7.5% For the latest and archived press releases, corporate
5.1% 3.5%
5 presentations and speeches, current share price and other
company information such as TNT’s online annual report
-5 -3.5%
and interim reports, please visit the corporate website at
-15 -11.2% group.tnt.com. TNT also invites you to visit the sites of TNT’s
-17.6% two main trading brands: www.tnt.com, www.tntpost.nl.
-25 The information on these websites does not form part of
this annual report.
-35 -31.5%
AEX DPWN Eurotop UPS TNT FDX AP
300
Transport
TNT investor relations
Source — Bloomberg Professional (own currency based)
Through the company’s investor relations activities, TNT aims
to provide shareholders with accurate and timely information.
TNT proactively and openly communicates with institutions
2006 and private investors and with intermediary groups such as
analysts and financial journalists.
30
26.3%
In addition to the quarterly, half-yearly and yearly result
25
presentations, TNT maintains regular contacts with financial
21.0% analysts and retail and institutional investors through meetings,
20 roadshows, conference calls and company visits. In 2007,
17.2%
15.3% 15.3% TNT visited investors in major financial cities in Europe,
15 the United States and Asia.

10
5.4%
Visiting address
5 Neptunusstraat 41-63
1.8%
2132 JA Hoofddorp
0 the Netherlands
AEX DPWN Eurotop UPS TNT FDX Kuehne
300 & Nagel
Transport
Mailing address
Source — Bloomberg Professional (own currency based)
TNT Investor Relations
P.O. Box 13000
130
Growth through networks 1100 KG Amsterdam
Annual report 2007 As of 2007 Kuehne & Nagel International AG was removed the Netherlands
from the peer group and replaced with Oesterreichische
CHAPTER 9
Investor relations, shares, Post to better reflect TNT’s business mix following the Telephone +31 20 500 6455
dividend and shareholder returns divestment of the Logistics division on 4 November 2006 Fax +31 20 500 7515
and the divestment of the freight management business E-mail: investorrelations@tnt.com
(formerly Wilson) on 5 February 2007. Internet site: group.tnt.com
 Reims
Most European postal operators view the UPU target terminal
dues system as inadequate for its purposes. As a consequence

regulatory
a significant majority of them are party to the separate,
multilateral “REIMS II” agreement where terminal dues are
related to a higher percentage of domestic tariffs and to a
certain extent to service quality as well. TNT has not entered

environment
into the REIMS II agreement because it feels it does not contain
a strong incentive/penalty system that would guarantee
improvement of the quality of service. Instead, TNT has
concluded commercially oriented bilateral agreements with
most of the European postal operators. The REIMS II parties
2007 —
Annual report plus TNT and Royal Mail entered into negotiations with a view
to concluding a market oriented “REIMS III” agreement.
This agreement entered into force on 1 January 2008. TNT
has informed the other REIMS parties that, in view of the
competitive nature of its home market, it will not sign the
REIMS III agreement as it stands. The resulting increase of
terminal dues for export mail will have a negative impact on
export volumes and (higher) terminal dues received for import
mail will have a negative impact on TNT’s domestic competitive
position. TNT Post will continue its policy of negotiating
bilateral agreements with European postal operators. Royal
Mail has taken a similar position.

Due to the importance of postal services to society, regulation

is a significant factor in TNT’s Mail business. TNT’s Express
EU postal regulation
business is also affected by some regulation. On the level of the European Union the regulatory framework
is set by the current EU Postal Directive 2002/39/EC, amending
Directive 97/67/EC with regard to the further opening to
Mail services competition of the community postal services (EU Postal
Directive). It includes a harmonised set of minimum obligations
International postal regulation for the universal postal service (mandatory postal services),
such as service levels, rates, and cost and revenue accounting
principles as well as quality of service standards with which all
Universal Postal Union Member States, including the Netherlands, must comply.
The Universal Postal Union (UPU) is a specialised agency
within the United Nations framework. It is responsible for the The EU Postal Directive also defines the maximum scope of
regulation of cross-border postal services. Practically all postal services the EU Member States are permitted to reserve
nations are members of the UPU. The common rules applicable for national public postal operators (reserved postal services).
to cross-border postal services are laid down in the UPU Member States are permitted to reserve postal services for
Convention and its regulations. In the Convention, the UPU domestic and cross-border mail. As of 1 January 2006 this
has established an international system for mutual payments reservation is limited to a weight of up to 50 grammes per item
for the delivery of cross-border letter mail, known as the of correspondence or a price of less or equal to two and a half
terminal dues system. The purpose is to compensate the times the public tariff for an item of correspondence in the first
destination country’s public postal operator for delivering weight step of the fastest category. To the extent necessary
international letter post. A different compensation scheme to ensure the provision of the universal service, outgoing
with similar purposes exists for parcel mail. cross-border mail and direct mail may continue to be reserved
within the same weight and price limits.
Since 1 January 2006 a terminal dues system applies under
which “target” countries (mostly industrialised countries) pay Recently the European Parliament adopted a political
each other country-specific rates linked to domestic postal compromise of the European Council of Ministers to amend
tariffs. Over the subsequent four years the percentage of the Directive 97/67/EC as amended by Directive 2002/39/EC.
domestic 20 grammes tariff paid is gradually being increased The European Parliament confirmed liberalisation as of January
from 60% to 68% in 2009. “Transition” countries (mostly 2011. Derogation is given to 11 Member States to open up their
developing countries) will continue to pay each other and market as of January 2013. The model that is now confirmed by
target countries a fixed kilogramme rate according to a per the European Parliament and the European Council of Ministers
item and per kilogramme formula based on world average abolishes the reserved area as a financing mechanism for
costs and on mandatory postal services, but allows for a wide variety of
131
a world average weight. Transition countries are expected to other methods, such as tendering, public funds and Growth through networks
move towards the target system before 2014, at which time all compensation funds. The model also leaves the Member States Annual report 2007
exchanges will be based on country-specific compensation. the discretionary powers to decide upon the scope of the
CHAPTER 10
The UPU terminal dues system will be further elaborated and mandatory postal services. Next steps in the process towards Regulatory
decided upon by the 2008 UPU Congress. The possible a new EU Postal Directive are the formal adoption by the environment
changes to the 2006 system have been extensively discussed in European Council of Ministers in second reading, the signing of
many regional postal meetings worldwide. the amended EU Postal Directive, and publication in the Official
 Journal of the European Communities. These steps are ——letters (including reply items) and printed matter with a
expected to take place in the coming months. maximum individual weight of two kilogrammes,
——postal parcels with a maximum individual weight of 10
Postal regulation in the Netherlands kilogrammes, and
——registered, registered insured and registered value
In the Netherlands, the key legislation regulating TNT’s Mail declared items.
activities is the Dutch Postal Act. This Act requires TNT to
perform the mandatory postal services in the Netherlands, In addition, bulk mail of letters up to an individual weight of 50
some of which are exclusive to TNT (the reserved postal grammes, which are conveyed against separately agreed rates,
services). In connection with the Dutch Postal Act there is the are part of the mandatory postal services. Mandatory postal
parliamentary Postal Decree, which specifies the services that services also cover rental of P.O. boxes.
constitute the mandatory postal services and defines the
scope of the reserved postal services. The combination of The Postal Act does not require TNT to provide the delivery of
these mandates and exclusive rights is commonly called the bulk printed matter such as advertising, magazines and
“Postal Concession”. The Postal Concession is performed by newspapers, the delivery of bulk letters with an individual
TNT’s subsidiary Royal TNT Post B.V. weight above 50 grammes and unaddressed mail items.

Furthermore, there is a General Postal Regulations Decree, For international inbound and outbound mail, based on the
which specifies TNT’s obligations regarding the performance of Dutch Postal Act and in accordance with the rules of the UPU,
mandatory postal services and the transparency of the financial mandatory postal services mainly comprise the conveyance
accounting of these services according to the EU Postal Directive. against payment of both postal items at standard single rates
and of bulk mail items at separately agreed rates with a
OPTA, the independent Supervisory Authority for Post and maximum individual weight of two kilogrammes and of postal
Telecommunications established by the government, supervises parcels with a maximum individual weight of 20 kilogrammes. In
TNT’s performance of the mandatory postal services. addition, mandatory postal services cover the postal services
The responsibility for postal policy remains under the authority regulated by the UPU.
of the Minister of Economic Affairs.
Regulatory conditions for the
On 5 June 2007 the Dutch Second Chamber of Parliament provision of mandatory postal services
adopted a new Postal Act. This Act foresees the full Regarding mandatory postal services the General Postal
liberalisation of the Dutch postal market ahead of the EU Regulations Decree imposes various regulatory conditions on
timetable. To ensure that the mandatory postal services are TNT with respect to service provision, tariffs, cost and revenue
provided, the Act intends to assign Royal TNT Post B.V. the accounting, financial administration and reporting. Other than
Postal Concession. The Act will have to be approved by the the mandatory postal services, none of TNT’s postal services is
Dutch First Chamber of Parliament before it enters into force. subject to governmental control.
The enactment date is dependent on the condition of a level
playing field in real terms on the postal markets of Germany According to section 2d of the Dutch Postal Act, TNT is obliged
and the United Kingdom. to give its competitors entrance to its P.O. boxes. This service
has to be delivered against reasonable, objectively justifiable
In December 2007, the Dutch Minister of Economic Affairs and non-discriminatory conditions and remunerations. To date
made use of the so-called ‘emergency-brake procedure’ when these conditions and remunerations are negotiated results
liberalisation as of 1 January 2008 was postponed for at least between parties. A similar, voluntary arrangement is made with
three months. The Minister based his decision on two TNT’s competitors with regard to mail items of competitors
arguments. First, the lack of clarity about the level playing field that enter TNT’s processes through the collection boxes.
with Germany (The effects of the introduction of a minimum
wage in the German postal sector are still unknown. In addition, With respect to service levels, the General Postal Regulations
the exemption Deutsche Post enjoys with regard to VAT Decree requires TNT to provide a level of service that complies
remains a barrier to competition that is still subject to debate with modern standards, to provide nationwide services and to
in German politics.). Second, in the Netherlands, new postal perform a delivery round every day, except for Sundays and public
operators and the unions have been given more time to reach holidays. TNT is required to deliver not less than 95%
an agreement on employment conditions. of all domestic letters the day after the day of posting, not
including Sundays and public holidays. TNT is required to maintain
In the coming months a decision of the First Chamber of a network of service points (letter boxes, post offices and agents)
Parliament is expected on the Postal Act. In February the for the access of the general public to the services. With respect
Minister of Economic Affairs will inform the Second Chamber to rates and conditions, TNT is required to set rates and
of Parliament about the status of the level playing field with associated conditions that are transparent, non-discriminatory
Germany and labour conditions in the Netherlands. During and uniform. However, TNT may grant volume discounts for items
the course of 2008, lower legislation, i.e. the Postal Decree of correspondence and negotiate specific prices and conditions
and General Postal Regulations Decree will be amended to fit with high volume users. TNT is further required to submit
132
Growth through networks the new Postal Act. proposed rate changes to OPTA, which has to evaluate whether
Annual report 2007 the proposed changes are in accordance with the price cap system.
The Postal Concession
CHAPTER 10
Regulatory Mandatory postal services The price cap system measures tariff developments in two
environment The domestic mandatory postal services mainly consist of the different baskets of services, a “total basket” and a “small users
conveyance against payment of standard single rates of the basket”. The total basket comprises domestic mandatory postal
following postal items: services provided to all customers. The small users basket
comprises the same services in mutual relations which are
representative for consumers and small business users.

The price cap system uses a weighing factor for each service in
these baskets. The levels of the indices for both baskets are not
to exceed the official national index of wages for employees in
the market sector.

The development of the indices from the base year of 1989 is

illustrated below:

Developments of tariffs, price index and wages

180
170
160
150
140
130
120
110
100
90
80
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Total tariffs
Consumer price index
Wages

The price cap system was last evaluated in 2002. Since an earlier Accounting and other financial obligations
decision of the Ministry of Economic Affairs to freeze the tariffs TNT’s obligations on reporting include the establishment of an
controlled by the price cap system was declared void in June annual report on TNT’s performance of the mandatory postal
2004, TNT has remained able to amend the individual rates for services. TNT’s financial accounting obligations require TNT to
mandatory postal services, subject to the provisions of the tariff maintain separate financial accounts within its internal financial
control system. As of 1 January 2007, after more than five and administration for mandatory postal services. This separate
a half years without rate changes, the rate for single-item accounting must be broken down into reserved postal services
domestic letters up to 20 grammes was increased to €0.44. and other mandatory postal services and must be separated
TNT intends not to increase the €0.44 rate again until 2010. from the accounting of TNT’s other activities. Every year,
The newly announced rates (12.1% average increase) remain TNT must submit to OPTA a declaration of an independent
within the inflation rate of 12.5% on aggregate since 2001. auditor, appointed by OPTA, that its financial accounting system
The rate increases fall within the maximum levels allowed by complies with these obligations. This declaration has to be
law, which has been confirmed by OPTA. published by OPTA in the “Staatscourant”.

Reserved postal services Underlying this accounting system and the financial reports to
Under the Dutch Postal Act and the Postal Decree, the OPTA is a system for allocating cost and revenues to the
reserved postal services include the following exclusive rights: different types of services. This system complies with the
accounting rules laid down in the EU Postal Directive.
——the conveyance of domestic and inbound international
letters with a maximum individual weight of 50 grammes Value added tax on postal services
at a rate of less than two and a half times the standard single At present, TNT is not allowed to charge value added tax (VAT)
rate (€0.44), on postal items forming part of the mandatory postal services.
——the exclusive right to place letter boxes intended for the The flip side of this is that for mandatory postal services TNT
public alongside or on public roads, and cannot deduct the VAT amounts paid on its purchases of
——the exclusive right to issue postal stamps and imprinted services and goods related to the mandatory services. TNT
stamps bearing the likeness of the monarch and/or the is required to charge VAT on all services not included in the
word “Nederland”. mandatory services, i.e. the services in competition with other
133
operators. Competitors are required to charge VAT on those Growth through networks
These exclusive rights do not extend to courier services. The items as well. Therefore, in the Netherlands there is a level Annual report 2007
exclusive rights also do not extend to the conveyance of parcels, playing field for competitors and TNT on these services. In
CHAPTER 10
letters weighing in excess of 50 grammes and printed materials most other Member States of the European Union the scope Regulatory
such as advertising, newspapers and magazines. In addition, the of mandatory services is very large. Hence a VAT exemption environment
exclusive rights do not extend to the conveyance of letters by a is given to national postal operators over a considerable part
business to its own customers. of the postal market in these countries. According to the
 European Commission, this distorts the functioning of the On 2 February 2004, the EU adopted a package of amendments
Internal Market for postal services. It has launched an to simplify and modernise its public procurement directives.
infringement procedure against Germany, the United Kingdom Those directives impose EU-wide competitive tendering for
and Sweden on this VAT issue in order to resolve it. public contracts above a certain value and transparency and
equal treatment for all tenders to ensure that the contract is
awarded to the tender offering the best value for money.
Express services The new directive 2004/17/EC of 31 March 2004, coordinating
the procurement procedures of entities operating in the water,
Express continues to deal with several regulatory developments energy, transport and postal services sectors also applies to
that need to be managed properly in order to secure TNT’s certain postal and non-postal activities that are not exposed
entrepreneurial freedom in the execution of the Focus on to competition. However, the directive leaves to the Member
Networks strategy for Express. States the possibility of postponing the application of the
directive on postal services until 1 January 2009. The
Governments and postal administrations around the world Netherlands has exercised this option. TNT will therefore
are redesigning postal policies. Postal reform has been high not be subject to the directive in the Netherlands until
on the agenda of the EU for several years. Political concerns 1 January 2009.
over the financial sustainability of the Universal Postal
Service and employment levels in a changing postal sector
increasingly threaten to influence the regulatory
environment of express delivery services. The European
Competition law
Commission’s declaration emphasising the differences TNT’s businesses are subject to competition rules in the
between express and universal postal services, adopted by jurisdictions in which they operate. The most relevant rules
the Telecom Council in October 2007, has been an important stem from:
milestone. The declaration will considerably reduce the risk
that express delivery services may have to contribute
directly into future compensation schemes financing the
European competition law
Universal Postal Service in Europe. In China and India, work The Court of Justice of the European Community has explicitly
on the amendment of the postal regulatory framework has confirmed that the rules of EU competition law also apply to the
continued. In Japan, the first phase of the privatisation of national mandatory postal services of the Member States. The
Japan Post has been implemented. European Community published a Notice in 1998 describing the
application of competition rules to the postal sector and on the
The increased attention to the impact of road and air assessment of certain state measures. In particular, TNT is
transport on air quality levels and the process of global subject to the competition rules contained in articles 81 and
warming will continue to shape the regulatory environment 82 of the EC Treaty and to preventative control of mergers and
for Express. Policy makers have been responding by a wide acquisitions as regulated in the EC Merger Control Regulation.
variety of regulatory initiatives, like the proposal of the Article 81 prohibits collusion between competitors that may
European Commission to include aviation in the EU’s affect trade between Member States and which has the
Emission Trading Scheme. Another example is the objective of restricting competition within the EU. Article
introduction by local authorities throughout the world of tax 82 prohibits any abuse of a dominant position within a
and other schemes managing the access of Express vehicles substantial part of the EU that may affect trade between
used for pick-up and delivery in city centres. In addition to Member States. National competition authorities and national
closely monitoring these developments, TNT is responding courts have been empowered to apply Articles 81 and 82 in
proactively, amongst others in the framework of its full in close operation with the European Commission in order
Planet Me initiative. to ensure the effective and uniform enforcement of these
competition rules.
In 2007, TNT prepared its application for the Authorised
Economic Operator (AEO) status for its customs related TNT is also subject to the competition rules laid down in the
Express services operations in all 27 EU countries. Effective Agreement of the European Economic Area (EEA), which
as of 1 January 2008, the EU’s AEO programme will increase corresponds to the rules of EU competition law. The EEA rules
border control, with the aim to secure the international supply for competition are enforced by the European Commission and
chain and modernise customs procedures within the EU. The the EFTA Surveillance Authority.
AEO status will recognise safe, secure and customs compliant
business partners in international trade. TNT Express is the
first of the four largest express integrators to apply for the
Dutch competition law
new standard, thus demonstrating its commitment to the The services TNT provides in the Netherlands, including the
security of its customers’ supply chain. mandatory postal services, fall within the scope of the Dutch
Competition Act. This Act stipulates a similar structure and set
of rules as the rules of EU competition law on the prohibition
134
Growth through networks
Public procurement of cartels, the prohibition of abuse of a dominant position and
the preventive control on mergers and acquisitions. Compliance
Annual report 2007 Public procurement is the purchase of goods, services and with the Dutch Competition Act is monitored by the
public works by governments. Public sector procurement must Netherlands Competition Authority, which is commonly called
CHAPTER 10
Regulatory follow transparent, open procedures ensuring fair conditions by its Dutch acronym NMa.
environment of competition for suppliers. At this moment, TNT does not
have an obligation to tender resulting from any public
procurement regulation.
 Strategic Risks
Specific Strategic Risks

key risks The increasing substitution of alternatives for TNT’s

Mail delivery services could reduce the revenues and
profitability of TNT’s Mail business and adversely affect
TNT’s revenues and profitability.
2007 —
Annual report TNT’s Mail business is an integral part of TNT’s total business
and during 2007 represented 38.4% of TNT’s group operating
revenues and 52.5% of TNT’s group operating income.
TNT’s postal Mail business delivers information such as
letters and bank statements as well as printed matter such as
direct mail and periodicals. Technologies such as e-mail and
internet (e.g. electronic banking) can be used to send or make
available such information faster and, in many cases, at a lower
price than traditional mail services. Due to increased
substitution, among other factors, traditional mail volumes in
the Netherlands have decreased in recent years, and TNT
expects this downward trend in mail volumes to continue in
the coming years. An increase in the use of these substitute
technologies would likely result in a further decrease in the
use of TNT’s traditional Mail services. If substitution
continues on a large scale, it could adversely affect the
volumes, revenues and profitability of TNT’s Mail business
The implementation of TNT’s business and financial strategies is and the company as a whole.
not without risk. The Board of Management however believes
that these strategies contain manageable execution risks as they The acquisition and integration of acquired businesses
are based on TNT’s core strengths. As described in chapter 6, involves significant challenges and costs and may not be
TNT’s comprehensive risk management and internal control, successful, which could adversely affect TNT’s results
integrity and compliance framework has been designed to of operations.
identify and prioritise significant risks and to develop mitigating TNT has entered into and will from time to time continue to
actions and has as its foundation the Committee of Sponsoring enter into (significant) acquisitions, because growth through
Organisations of the Treadway Commission (COSO) acquisitions remains a key element of TNT’s Focus on
Enterprise Risk Management – Integrated Framework (ERM). Networks strategy.

Mergers, acquisitions and capital investments undergo detailed TNT’s acquisition plans are focused on sustainable profitable
due diligence and appraisal reviews and strict approval levels growth and carefully developed based on the best possible
have been established ensuring that no material commitments analysis and judgment. Annual budgets and multi-year strategic
can be made without approval of the Board of Management and plans support decisions leading to acquisitions. These are
the Supervisory Board. discussed where appropriate with the Supervisory Board in
detail prior to approval. These plans, however, are inherently
No matter how good a risk management and control system uncertain and do provide executions and market risks which
may be, it cannot provide certainty that it will prevent negative might have been overlooked or not correctly forecasted.
developments in TNT’s business and business environment
from occurring, and it is important to note that any of the The integration of acquired businesses involves inherent costs
following risks could have a material adverse effect on the and uncertainties that include the effect on the acquired
company’s financial position, results of operations, liquidity and businesses of integration into the TNT organisation and culture
the actual outcome of matters referred to in the forward- as well as the availability of and demands on management
looking statements contained in this annual report. resources to oversee the integration and manage the newly
acquired businesses. The integration of the international
The risks described below have been classified by the risk companies TNT has acquired normally results in significant
categories as defined by COSO – ERM and the categories also challenges and change related costs in the areas of accounting,
recommended by the Frijns Committee. The risks are further finance, operations, IT, strategy, and human resources. If an
classified into specific risks and inherent risks facing the group. existing or future integration effort is delayed or is not
Specific risks are risks that the Board of Management believes successful TNT may incur additional costs, the value of
could negatively impact TNT’s short to medium term investment in the acquired company may decrease significantly,
objectives, whilst inherent risks are those risks that are and TNT’s growth strategy may not be successfully achieved.
constantly present in the business environment, but which are Any material delays, unexpected costs or other problems
135
considered sufficiently material to require disclosure and encountered in connection with integrating newly acquired Growth through networks
management. The sequence that these risks are presented in businesses could therefore have an adverse effect on the Annual report 2007
no way reflects any order of importance, chance or materiality. company’s revenues and profitability. CHAPTER 11
Key
risks
 Changes in market conditions and/or relationships with If a significant incident occurred involving the company’s handling of
TNT’s joint venture partners may require TNT to dangerous and hazardous materials or if confidential consignments
revise its strategies, which could adversely affect TNT’s got misplaced or lost, TNT’s operations could be disrupted and the
results of operation. company could be subject to a wide range of additional measures or
Changes in market conditions may lead TNT to revise the restrictions imposed on the company by local or governmental
strategies in which joint ventures were concluded. Revised authorities as well as potentially large civil and criminal liabilities.
strategies may lead TNT to demerge these businesses or This could negatively affect the group’s revenues and profitability.
end these joint ventures. The resulting employment reduction A significant incident, particularly a well-publicised incident
or other significant restructuring costs could impact involving potential or actual harm to members of the public,
TNT’s profitability. could also damage TNT’s reputation.

As an owner and operator of a large fleet of aircraft and trucks,

Operational Risks TNT is involved in activities which expose the company to
liability in the case of a major air or road incident, not only
Specific Operational Risks for employees, facilities and third party property, but also for
the general public. An incident involving one of the company’s
TNT depends on a number of infrastructure facilities aircraft or vehicles could cause significant loss of life and
for which the group has limited or no comparable property and could adversely affect TNT’s reputation and
back-up facilities, so if operations were disrupted at share price.
one or more of these facilities, TNT’s business and
results of operations would suffer. TNT may not accurately forecast future infrastructure
A portion of TNT’s infrastructure is concentrated in single requirements, which could result in excess or
locations for which there are limited or no comparable back-up insufficient capacity and negatively affect the group’s
facilities or very expensive fall back scenarios in the event revenues and profitability.
of a disruption of operations. An example of this is the TNT In order to maintain market position and future growth, TNT
European Express air hub in Liège, Belgium. The operation of must make large on-going investments in infrastructure such as
the TNT facilities involves many risks, including power failures, aircraft, trucks, and depots. Infrastructure investments are
the breakdown, failure or substandard performance of based on forecasts of future capacity requirements. It may be
equipment, the possibility of work stoppages or civil unrest, difficult to forecast accurately for future requirements, since
natural disasters, catastrophic incidents such as airplane they are based on a large number of factors, including factors
crashes, fires and explosions, and normal hazards associated beyond the direct control of TNT management such as general
with operating a complex infrastructure. If there was to be a economic conditions and changes in governmental regulation.
significant interruption of operations at one or more of the As a consequence, there may be a mismatch between
company’s key facilities and operations could not be transferred investment and actual requirements. If TNT underestimates the
or only at very high costs to other locations, TNT might not group’s future capacity requirements, the company will not be
meet the needs of its customers, and business and operating able to meet the needs of customers and could lose business,
results would be adversely affected. market share, revenues and profits. If TNT overestimates
future needs, or if major contracts are cancelled by customers,
Incidents resulting from the transport of hazardous the company may experience costly excess capacity and this
materials and confidential consignments or a major could adversely affect profitability.
incident involving TNT’s sorting centres, warehousing
facilities, air or road fleet may adversely affect the Restructurings of operations and other measures taken
group’s revenues, profitability and reputation. to reduce costs, including forced employee lay-offs,
TNT transports hazardous materials for a number of may not achieve the results intended and may
customers in the automotive, biomedical and chemical adversely affect TNT’s employee relations, reputation,
industries. The hazardous consignments include airbags, revenues and profitability.
batteries, paint, blood samples, medical substances, dry ice, and From time to time TNT restructures, redesigns or integrates
chemicals. As part of TNT’s Mail services, the company may various aspects of the company’s operations in an effort to
also transport hazardous or dangerous goods without having achieve cost savings, flexibility and other efficiencies.
been notified about the nature of the goods transported. Restructuring of operations and other cost reducing measures
TNT faces a number of risks by transporting these materials, may not achieve the results intended and may invoke
such as personal injury or loss of life, severe damage to and restructuring and other costs and changes to TNT that
destruction of property and equipment, and environmental adversely affect revenues and profitability. New initiatives as
damage. Incidents involving these materials could result from described in TNT Post’s Master Plans may require forced
a variety of causes including sabotage, terrorism, accidents or employee lay-offs which may damage TNT’s employee relations
the improper packaging or handling of the materials. and reputation in the employment market. If TNT is not able to
reach agreement with trade unions on these Master Plans,
In addition TNT transports confidential and sensitive profitability could suffer due to delays in or not reaching
consignments on behalf of some of its customers. TNT planned savings.
136
Growth through networks does not always know the confidential and sensitive nature
Annual report 2007 of these consignments and customers may choose to enter
consignments into TNT’s network without registering the
Generic Operational Risks
CHAPTER 11
Key consignment with the result that they cannot be tracked Strikes, work stoppages and work slowdowns by TNT’s
risks and traced. employees and the terms of new collective labour
agreements could negatively affect TNT’s revenues
and profitability.
The success of TNT’s business also depends upon avoiding countries, as well as temporary closure of TNT offices or other
strikes, work stoppages and slowdowns by TNT’s employees. facilities. Such closures or travel or shipment restrictions would
Industrial action by large trade unions or even relatively small, severely disrupt TNT’s business operations and adversely affect
but key groups of TNT’s employees, such as airline pilots, the group’s financial condition and results of operations. TNT
could seriously disrupt the TNT’s operations. Industrial action has implemented measures to develop written preventive
may occur for reasons unrelated to TNT’s collective labour procedures and contingency plans to mitigate any future
agreements with a particular trade union or group of outbreak of avian influenza, SARS or any other epidemic but the
employees. For example, TNT’s employees may refuse crossing impact of any outbreak is difficult to gauge and these plans may
picket lines established by other trade unions of other not be fully effective.
companies. The collective labour agreement, affecting
approximately 57,000 employees in the Netherlands, is subject TNT’s operations and earnings are subject to risks
to a renewal in April 2008. If TNT is not able to renew this related to the impact of climate change.
agreement or other key agreements with its employees, and TNT believes that concern about climate change will lead to
a strike, work stoppage or work slowdown occurs, TNT’s government action that will require the company to further
revenues and profitability could be adversely affected. manage emissions from its ground and air fleet. As such, there
is a risk to future operations and a compliance risk for existing
TNT’s business may be negatively affected by the terms of facilities and TNT’s fleet, if the company is not able to
collective labour agreements that TNT concludes with its demonstrate adequate emissions management. Realisation
employees. These terms could include increases in of these risks could have an adverse impact on operational
compensation and employee benefits, work rules less flexible performance and the group’s financial position.
than those of TNT’s competitors, and limitations on future
workforce reductions and other factors that make TNT’s
workforce less mobile. TNT’s profitability could suffer if
TNT is not able to conclude collective labour agreements on
Legal and Regulatory Risks
satisfactory terms with its employees.
Specific Legal and Regulatory Risks
Increased security and anti-terrorism requirements Minimum wage legislation in Germany for the Postal
could impose substantial additional costs on TNT, sector could adversely affect TNT’s ability to grow its
especially at TNT Express. Mail business outside the Netherlands.
As a result of increased concerns about global terrorism and On 21 January 2008, two subsidiaries of TNT Post Germany
aviation security, governments and airline operators around the instituted preliminary legal proceedings with the Administrative
world are adopting or are considering adopting stricter security Court (Verwaltungsgericht) in Berlin to obtain an injunctive relief
requirements that will increase operating costs for businesses, (einstweiligen Anordnung) to suspend the generally binding
including those in the transportation industry. For example, in minimum wage in the postal services sector as adopted by
October 2006 the EU adopted new rules enhancing many of the the Federal Ministry of Labour and Social Affairs on
security requirements for air cargo on both passenger and 28 December 2007. TNT has taken the position that this
cargo aircraft. It is not possibel to fully determine the effect that minimum wage is unconstitutional.
these new rules or changed policies will have on TNT’s cost
structure or its operating results. It is reasonably possible, In view of fair competition in the postal market, the generally
however, that these rules or other future security requirements binding validity of the minimum wage agreement of the
for air cargo carriers could impose material costs on TNT. employers’ association for postal services is unacceptable to
TNT Post since it would seriously jeopardise the liberalisation
TNT faces risks related to health epidemics and other of the German mail market and TNT’s ability to build a
outbreaks of contagious diseases, including pandemic sustainable profitable business. Similar barriers in national mail
influenza, avian influenza and SARS. markets elsewhere could severely hamper TNT’s successful
TNT’s business could be adversely affected by the effects of implementation of its strategy in the European mail market.
avian influenza, SARS or another epidemic or outbreak. Since
2005 the World Health Organisation and other health The further liberalisation of the Dutch and EU
monitoring bodies have reported outbreaks of a highly postal markets could adversely affect TNT’s revenues
pathogenic avian influenza, caused by the H5N1 virus, in certain and profitability.
regions of Asia and Europe and there have been reports on The process of liberalisation of the postal market within the
the occurrences of avian influenza in various parts of China, Netherlands, which began in the late 1980s, is continuing. This
Indonesia, Thailand and other South-east Asian countries, presents a number of risks to TNT’s Mail business. Pursuant to
including some confirmed human cases. An outbreak of avian the EU Postal Directive, as of 1 January 2006 the restriction
influenza in the human population could result in a widespread that reserved the provision of letters up to 100 grammes
health crisis that could adversely affect the economies and exclusively to TNT (the reserved postal services) was reduced
financial markets of many countries. Additionally, any to 50 grammes. On 13 April 2006 the Dutch government
recurrence of SARS, a highly contagious form of atypical decided to fully liberalise the postal market in the Netherlands
pneumonia, similar to the occurrence in 2003 which affected in 2008 on the condition that there is a “level playing field” with
137
China, Hong Kong, Taiwan, Singapore, Vietnam and certain the British and German postal markets. The Dutch government Growth through networks
other South-east Asian countries, would also have similar also agreed upon the proposal for a new Dutch Postal Act. Annual report 2007
adverse effects. These outbreaks of contagious diseases, and The proposal for a new Dutch Postal Act followed the vision of CHAPTER 11
other adverse public health developments would have a the Dutch Minister of Economic Affairs on the postal market in Key
material adverse effect on TNT’s business operations. These the Netherlands, which was published in 2004. As discussed in risks

could include the company’s ability to ship consignments or greater detail in chapter 10 of this annual report, this new
otherwise make deliveries of products originating in affected Dutch Postal Act addresses a number of issues that are directly
 relevant to TNT’s business, including price controls and the that complement the company’s strategy, or TNT divests part
scope of the mandatory postal services. On 5 June 2007 the of its business. Any approval of a joint venture, an acquisition or
Dutch Second Chamber of Parliament adopted the new Postal a divestment of shares or a business by competition authorities
Act. The Act will have to be approved by the Dutch First may contain certain restrictions or conditions with respect to
Chamber of Parliament before it enters into force. The the intended transaction.
enactment date is dependent on the condition of a level playing
field in real terms with the postal markets of Germany and the TNT may not be able to implement a transaction as
United Kingdom. In December 2007, the Dutch Minister of contemplated in compliance with any restrictions or conditions
Economic Affairs made use of a so-called ‘emergency-brake imposed by the Directorate General of Competition
procedure’ when liberalisation as of 1 January 2008 was (DG Competition) of the European Commission or national
postponed for at least three months. The Minister based his competition authorities, and these restrictions or conditions
decision on two arguments. First, the lack of clarity about the may negatively affect TNT’s revenues and profitability. If TNT
level playing field with Germany (the effects of the introduction is unable to implement a foreseen transaction under the
of a minimum wage in the German postal sector are still restrictions or conditions applicable, or if the intended
unknown. In addition, the exemption Deutsche Post enjoys with transaction is prohibited, the company may be unable to
regard to VAT remains a barrier to competition that is develop alternative approaches. This would have an adverse
still subject to debate in German politics). Second, in the effect on TNT’s ability to focus on the company’s core business.
Netherlands, new postal operators and the trade unions have
been given more time to reach an agreement on employment Compliance with regulations and the securing of
conditions. Any of these risks adversely affect TNT’s business, effective flight slot times may result in significant
revenues or profitability. The new Dutch Postal Act may changes to the company’s operations and could limit
adversely affect TNT’s business, revenues and profitability. For TNT’s flexibility in operating its business and negatively
example, a possible expanded role for OPTA, the Supervisory affect costs and profitability.
Authority for Post and Telecommunications in the Netherlands, TNT is subject to a wide variety of complex and stringent
in controlling TNT’s price determination for competitors might aviation, transportation, environment, employment and other
have an adverse effect on TNT’s competitive position. laws and regulations in the Netherlands, the EU and the other
jurisdictions where it operates. Existing regulations are subject
Recently the European Parliament adopted a political to constant revision, and new regulations are constantly being
compromise of the European Council of Ministers to amend adopted. The interpretation and enforcement of such laws and
Directive 97/67/EC as amended by Directive 2002/39/EC. The regulations vary, and could limit TNT’s ability to provide its
European Parliament confirmed liberalisation as of January 2011. services in certain markets. It is uncertain whether existing laws
Derogation is given to 11 Member States to open up their market and regulations or future regulatory, judicial and legislative
as of January 2013. The model that is now confirmed by the changes will have a material adverse effect on TNT, whether
European Parliament and the European Council of Ministers national or international regulators, competition authorities or
abolishes the reserved area as a financing mechanism for third parties will raise material issues with regard to the
mandatory postal services, but allows for a wide variety of other company’s compliance or non-compliance with applicable laws
methods, such as tendering, public funds and compensation and regulations, or whether other regulatory activities will have
funds. The model also leaves the Member States the a material adverse effect on the company’s business, revenues
discretionary powers to decide upon the scope of the mandatory and profitability.
postal services. The new EU Postal Directive may adversely
affect TNT’s European Mail Networks business. For example, if For example, in the TNT Express businesses, the division
the new EU Postal Directive provides for insufficient guarantees, operates various types of aircraft throughout Europe and it
Member States can abuse national USO regulation to protect started a direct service between Europe and China in January
their national operators. TNT’s Mail business could therefore be 2007. As a result, TNT is required to comply with a wide
adversely affected by transposition and implementation of the EU variety of international and national laws and regulations. In
Postal Directive into national postal legislation as well as by some of the markets in which the company operates,
non-postal national legislation that might in practice affect the regulations have been adopted (or proposed) which impose
emergence of competition in the postal market. An example of night-time take-off and landing restrictions, aircraft capacity
this is the introduction of an artificially high minimum wage in the limitations and similar measures in order to address the
German postal sector that could effectively function as a barrier concerns of local constituencies.
to competition. The next steps in the process towards a new EU
Postal Directive are the formal adoption by the European In addition, as the provider of time sensitive delivery services,
Council of Ministers in second reading, the signing of the the TNT Express business needs to secure adequate and
amended EU Postal Directive, and publication in the Official effective flight time slots from airport coordination (or other
Journal of the European Communities. These steps are expected local) authorities in all the countries and airports TNT operates
to take place in the coming months. into and out from. The timing or limited availability of these
slots could have an impact on the efficient operations of the
Generic Legal and Regulatory Risks TNT Express time sensitive air and road networks and could
result in penalties for failing to meet the company’s on-time
138
Growth through networks Unfavourable decisions of competition authorities delivery service commitments or increased costs for the case
Annual report 2007 concerning joint ventures, acquisitions or divestments where TNT would be obligated to purchase slots from third
CHAPTER 11 could restrict TNT’s growth, strategic progress, parties to maintain its service levels.
Key profitability and ability to compete in the market for
risks TNT’s services. TNT relies on night-time operations at the air Express hub in
As a part of TNT’s strategy Focus on Networks, from time to Liège, Belgium for some of its international Express business.
time TNT seeks alliances with or acquires shares in companies A curtailment of night-time take-offs and landings at any of
TNT’s key facilities, such as Liège, would likely harm the remittances and other payments. TNT’s international
division’s business. Some governments have imposed stringent operations are also exposed to local business risks and
new security measures on air carriers that could result in challenges. The group faces potential difficulties in staffing and
additional operating costs. TNT’s failure to comply with these managing local operations, succession coverage of key
measures or the costs of complying with existing or future individuals and talent management. TNT is exposed to the credit
government regulation, could negatively affect revenues and risks of local customers and distributors. In many of the
profitability. In addition, existing or future regulation on jurisdictions in which the company operates, in particular
transport of goods may negatively affect TNT’s ability to emerging markets such as China, India, Brazil and Russia, aspects
perform services to meet customer needs or may increase the of the developing legal system (including the ability to enforce
costs of providing these services. In the TNT Mail business in contracts, an independent and experienced judiciary, and similar
the Netherlands, from time to time discussions come up as to factors) create an uncertain environment for investment and
whether or not TNT should provide access to the company’s business activity. These risks and complexities will increase in
mail boxes as a collecting point for TNT’s competitors. At the pursuit of the Focus on Networks strategy to expand
present competitors focus on large volume clients and do not operations to new markets. TNT’s overall success as a global
compete in the consumer market. A change in this view of business depends, in part, on its ability to succeed in different
competitors and support of this view by the regulator could economic, social, political and legal conditions. TNT may not
negatively affect TNT’s costs and profitability. succeed in developing and implementing policies and strategies
that are effective in the locations where TNT’s business is
The legal concept of limited liability for loss or damage conducted. Failure to do so may have a material adverse effect
of goods carried by TNT is increasingly being on the groups financial condition and results of operations.
challenged and this may result in increased exposure
to claims. Employee misconduct could result in financial
TNT transports goods under the conditions of the international losses, the loss of clients and fines or other sanctions
conventions in respect of the carriage of goods by air (the by the governments of the countries in which TNT
Warsaw Convention) and by road (the CMR Conventions). does business.
These conventions contain provisions that limit TNT’s liability TNT may be unable to prevent its employees from engaging in
in the event that TNT looses or damages shipments belonging misconduct, fraud or other improper activities that could
to the company’s customers. In the past this principle was adversely affect TNT’s business and reputation. Misconduct
generally accepted as normal business practice, but in recent could include the failure to comply with applicable laws or the
years courts and regulators, in an increasing number of TNT Business Principles, or a breach of confidentiality. The
jurisdictions, are more sympathetic to allegations of “gross precautions taken by TNT to prevent and detect this activity
negligence” or “lack of due care”, thereby setting aside the may not be effective. Investigations of suspected fraudulent
principles of limited liability. This trend exposes TNT to more activity could expose TNT to additional sanctions if an
and increased loss and damage claims. TNT has covered this investigation is ineffective or hampered by local legal
additional exposure by its insurance arrangements. However, restrictions. As a result of employee misconduct, TNT could
if this trend continues it could definitely result in significantly incur fines and penalties imposed by governments in the
higher insurance costs and thus in increased financial exposure countries in which it does business. Any such fines or penalties
and adversely affect TNT’s profitability. could lead to adjustments to the financial statements and
resulting liabilities which could reduce profitability. In addition,
Determination that subcontractors were to be negative publicity in relation to employee misconduct could
considered TNT employees would affect the company’s negatively affect TNT’s reputation, harm its ability to recruit
current business model, causing operating expenses to employees and managers and reduce revenues.
rise and net income to suffer.
In various jurisdictions, TNT uses subcontractors to perform TNT’s strategic objectives could be subject to political
aspects of the group’s business, such as picking-up and debate and adverse outcome.
delivering parcels, as is common practice in the transportation Political decision making could have an adverse influence on
industry. In certain jurisdictions, the authorities have brought TNT’s ability to achieve its Focus on Networks strategy and
criminal and/or civil actions alleging that subcontractors or carry out its operations effectively. Postal regulation is often
their employees engaged by TNT are to be regarded as TNT’s subject to fierce political debate. For instance, the liberalisation
own unregistered employees. If these allegations were upheld of the Dutch postal market seems to go hand-in-hand with an
by a court, TNT would incur, in addition to criminal sanctions, increase in regulatory and supervisory controls for the national
costs such as social security contributions, wage taxes and postal operator, TNT Post. Although the general regulatory
overtime payments in respect of such employees. trend in Europe is towards liberalisation of the postal sector,
Subcontractors could also bring civil actions seeking the experiences in Germany and the United Kingdom also show
reclassification of subcontractor relationships in employment that the political support for de facto liberalisation is tempered
contracts. If these actions were successful, operating expenses by concerns over labour conditions and the sustainability of
would rise and net income would suffer. the Universal Postal Service. In emerging markets like China
and India, modernisations of postal regulatory frameworks
TNT is exposed to various global and local risks that have a tendency to lead to stricter policies towards mail and
139
may have a material adverse effect on the group’s express services. Growth through networks
financial condition and results of operations. Annual report 2007
TNT operates around the globe and provides a worldwide CHAPTER 11
service with facilities in many countries, which means that the Key
company is confronted with complex legal and regulatory risks

requirements in many jurisdictions. These include tariffs, trade

barriers and requirements relating to withholding taxes on
 Financial Risks such costs, a global economic downturn could have a material
adverse effect on the results of TNT’s Express delivery business,
Specific Financial Risks and this would adversely affect the results of TNT as a whole. In
addition, a continued economic downturn could lead to TNT’s
A downgrade in TNT’s credit rating may increase customers asking for price reductions that could adversely affect
TNT’s financing costs and harm TNT’s ability to margins. A slow economy may also result in a continued decline in
finance its operations and acquisitions, which could demand for direct mail in the Netherlands.
negatively affect revenues and profitability.
A downgrade in TNT’s credit rating may negatively affect the TNT is exposed to currency and interest rate
company’s ability to obtain funds from financial institutions, fluctuations that could have an adverse effect on the
retail investors and banks and increase financing costs by company’s results and financial condition as well as on
increasing the interest rates of outstanding debt or the interest the comparability of TNT’s financial statements.
rates at which TNT is able to re-finance existing debt or incur Part of TNT’s total revenues and operating expenses as well as
new debt. On 29 August 2007, S&P lowered its corporate credit assets and liabilities are denominated in currencies other than the
ratings on TNT to “BBB+” long-term / “A2” short-term with euro. For the year 2007, for example, around 30% of revenues and
stable outlook from “A–” long-term / “A-2” short-term with a 27% of asset book value is held in countries outside of mainland
negative outlook (such ratings having been issued by S&P on Europe. As TNT expands its international operations, it can be
10 March 2006). On 27 March 2006 Moody’s Investors Service expected that an even greater portion of its revenues, costs,
downgraded the issuer and senior unsecured debt ratings of assets and liabilities will be denominated in non-euro currencies.
TNT N.V. to “A3” from “A2”, and the CP rating of TNT Finance The exchange rates between these currencies and the euro
B.V., a 100% owned and guaranteed finance subsidiary of TNT, may fluctuate substantially. As a result, currency fluctuations
to Prime-2 from Prime-1. The Moody’s outlook for the ratings could have a material adverse effect on TNT’s results and
has been stable since. financial condition in any given reporting period and may
affect the comparability of TNT’s financial statements from
Generic Financial Risks period to period.

Intensifying competition may put downward pressure Management has set up a Group Policy to require all group
on prices and could have an adverse effect on TNT’s companies to manage their foreign exchange risk against the
revenues and profitability. functional currency. Group companies are required to hedge
TNT competes with many companies and services on a local, material balance sheet exposures via the use of FX derivatives
regional, European and international level. TNT’s competitors with the Group Treasury department, whereby a financing
include the incumbent postal operators of other nations in company operated by the Group Treasury department, as
Europe, Asia, Australia and the United States, motor carriers, 'in-house bank' trades these FX derivatives back-to-back with
express companies, logistics service providers, freight external banks.
forwarders, air couriers and others. TNT expects competition
to intensify in the future in all of its core business areas. At an earnings level, the most significant exposures are against
Targeted, aggressive actions by competitors may negatively the US dollar and the British pound, whereby TNT was a net
impact TNT’s prices. In the Netherlands, TNT’s present market payer of both currencies. If the euro, on average over the year,
share in the mail business results from being the former had weakened/strengthened 25% against the US dollar compared
government-operated monopoly. TNT expects its market to the average FX rate for the year, then the 2007 profit before
share to erode due to serious competition and, in the longer income tax would, with all other variables held constant, have
term, the continuing liberalisation of the Dutch mail regulatory been approximately €15-20 million lower/higher. Similarly, if the
regime. In Europe, TNT continues to face strong competition in euro on average, would have weakened/strengthened 25% against
both its Mail and Express businesses. TNT’s strategy focuses on the British pound with all other variables held constant, the profit
a differentiated product and price approach and the quality of before income tax would have been €20-25 million lower/higher.
services related to price rather than on price discounts.
Nevertheless, increased competition may force prices for In terms of a revaluation of foreign currency assets and liabilities
TNT’s services down and thus cause TNT’s revenues and as at 31 December 2007, the exposures are smaller. If as at 31
profitability to decrease. December 2007, the euro had weakened/strengthened 25%
against the US dollar with all other variables held constant, the
The trends towards liberalisation of European postal markets profit before income tax would have been €1 million higher. If at
may also result in further consolidation within the Mail and 31 December 2007, the euro had weakened/strengthened 25%
Express businesses as competitors seek to expand into newly against the British pound with all other variables held constant,
opened geographic markets and former state postal the profit before income tax would have been €1 million lower.
monopolies enter into acquisitions or alliances in order to
expand the range and geographic coverage of their services. The main sensitivities on revenues can be derived from the
Consolidation within TNT’s businesses may result in increased geographical segmentation as provided in the additional notes to
competition and, as a consequence, adversely affect TNT’s the financial statements.
business, revenues and profitability.
140
Growth through networks Currently no net investment hedges are outstanding. However,
Annual report 2007 A sustained economic downturn could adversely significant acquisitions and local debt is usually funded in the
CHAPTER 11 affect TNT’s business and financial condition. currency of the underlying assets. These form a natural hedge
Key Developments and trends in the world economy may have a against foreign currency cash flow and earnings risks.
risks material adverse effect on TNT’s financial condition and/or
results of operations. Because the Express delivery business has Part of TNT’s borrowings and leases are against floating interest
high fixed costs and greatly depends on high volume to recover rates. These floating interest rates may fluctuate substantially
and could have a material adverse effect on TNT’s results Events in the markets where TNT conducts its businesses,
and financial condition in any given reporting period. including significant declines in stock prices, market
capitalisations and credit ratings of market participants, as
TNT’s Group Policy is to limit the worst case interest cost over well as TNT’s ongoing review and refinement of its business
a seven year period as a percentage of EBITDA with a statistical plans, have resulted and may result in further substantial
97.5% level of confidence. As at 31 December 2007, if interest impairment write-downs of intangible or other assets at any
rates on borrowings had been 1% lower/higher with other time in the future.
variables held constant, the profit before income tax would
have been €3 million lower/higher. Equity would be impacted In addition, TNT has been and may be required in the future to
by €36 million due to the outstanding interest rate swaps. recognise increased depreciation and amortisation charges if it
is determined that the useful lives of TNT’s fixed assets are
Although TNT generally enters into hedging arrangements shorter than originally expected. Such changes would have the
and other contracts in order to attempt to reduce the effect of reducing net income.
company’s exposure to currency and interest fluctuations,
these measures may be inadequate or may subject TNT to The multinational nature of TNT’s business could
increased operating or financing costs. See also note 31 to the expose the company to uncertainty in effective tax
consolidated financial statements. planning and regulatory reviews and audits.
Multinational groups of the size of TNT are exposed to varying
A decline in the value of the euro could reduce degrees of uncertainty related to tax planning and regulatory
the value of any investment in TNT and any reviews and audits. TNT accounts for its income taxes on the
dividends received. basis of its own internal analyses, supported by external advice.
Since its introduction on 1 January 1999, the value of the euro TNT continually monitors its global tax position, and whenever
relative to the US dollar has fluctuated widely. Fluctuations in uncertainties arise, TNT assesses the potential consequences
the exchange rate between the US dollar and the euro will and either accrues the liability or discloses a contingent liability
affect the US dollar equivalent of the euro price of TNT’s in its financial statements, depending on the strength of the
euro-denominated shares, TNT’s non-listed American company's position and the resulting risk of loss.
Depositary Receipts (ADRs) and the US dollar value of any
cash dividends. If the value of the euro relative to the US dollar With regard to the key risks as mentioned and other
declines, the market price of TNT’s ADRs is likely to be risks TNT’s insurance policy is based on the
adversely affected. Any decline in the value of the euro would conservative approach of retaining frequency losses
also adversely affect the US dollar amounts received by (self insured) and transferring “catastrophe
shareholders on the conversion of any cash dividends paid in exposures” to the insurance market.
euro on TNT’s ADRs. As frequency losses (such as cargo and vehicle claims) are of an
operational and customer service nature, TNT believes that self
A downturn in capital markets may decrease the value insurance is the best method to motivate operational units to
of investments made in these markets for TNT’s address the underlying causes of these losses. Improved risk
pension schemes and a decline in interest rates may management then has an immediate positive financial effect.
increase the fair value of TNT’s pension liabilities, TNT’s total self insured frequency claims are structured via an
which in turn could require significant additional in-house captive insurance company and capped on an annual
funding by TNT. basis via reinsurance. During 2007, TNT’s total annual retention
TNT’s main Dutch ‘defined benefit pension scheme’ has total cap on these losses was €6 million.
assets of over €4 billion, some of which are funded by
investments held in equities with a view to benefiting from TNT’s “catastrophe exposures” are insured in the traditional
capital appreciation. The value of these securities may be insurance markets. These include aviation, property and
volatile and a downturn in the capital markets could significantly business interruption, general liability, fraud, and director and
reduce the value of these assets. In addition a decline in interest officers' liability insurance. TNT has a strict policy to transfer
may increase the fair value of TNT’s pension liabilities. Should risks only to insurers with a rating of A- or higher, and this is
the coverage ratio of assets divided by liabilities fall below the monitored on an ongoing basis.
minimum funding requirements prescribed by De
Nederlandsche Bank (DNB), into which the Independent Attention is being given to adjust TNT’s insurance protection to
Supervisory Authority for Pensions and Insurance was merged the ever changing legal and regulatory environment in which it
during 2004, TNT will be required to increase contributions to operates and all insurance policies are therefore tailor-made to
the funds. If the assets were to lose a substantial amount of their TNT’s unique requirements. In addition, current insurance
value or if, as a result of a decline in interest, TNT’s liabilities arrangements also need to support strategic developments and
would substantially increase, or both, TNT might be required to the changing risk profile of the company.
make large payments into the funds, which would adversely
affect liquidity over a number of years.

Changes in markets and TNT’s business plans have

141
resulted and may in the future result in substantial Growth through networks
write-downs of the carrying value of assets, thereby Annual report 2007
reducing net income. CHAPTER 11
Regular review of the carrying value of assets (including Key
intangible, tangible and financial fixed assets) has resulted, from risks

time to time, in significant impairments, and TNT may in the

future be required to recognise additional impairment charges.
 published by
2007 —
Annual Report

Publisher —
TNT N.V.
P.O. Box 13000
1100 KG Amsterdam
The Netherlands

Telephone + 31 20 500 6000

Fax + 31 20 500 7000
Website group.tnt.com
Chamber of Commerce Amsterdam
Reg. No. 27168968

Text —
www.englishworks.de
Mark C. Gray

Data handling and consultancy —

www.dhv.com
DHV Sustainability Consultants

Concept, design and coordination —

www.fabrique.nl
Fabrique Communication and Design

Photography —
Anton Corbijn

Paper —
Interior ­­— Datacopy 100 gr / m2
Exterior — Metaphor 310 gr / m2 100% recycled

Lithography and printing —

Thieme Amsterdam
142
Growth through networks Binding —
Annual report 2007 Binderij Hexspoor B.V.
CHAPTER 11
Key
risks

We welcome feedback on this report:

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