TNT Annual Report 2008

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Sure we can Annual report 2008



Sure we can Annual report 2008



Cautionary note with regard to“orward-looking statements”Some statements in this annual report are “orward-looking statements”.

By their nature, orward-looking statements involve risk and uncertainty

because they relate to events and depend on circumstances that will occur in

the uture. These orward-looking statements involve known and unknown

risks, uncertainties and other actors that are outside o TNT’s control and

impossible to predict and may cause actual results to dier materially rom any

uture results expressed or implied. These orward-looking statements are

based on current expectations, es timates, orecasts, analyses and projections

about the industries in which TNT operates and TNT management’s belies

and assumptions about uture events.

You are cautioned not to put undue reliance on these orward-looking

statements, which only speak as o the date o this annual report and areneither predictions nor guarantees o uture events or circumstances. TNT

does not undert ake any obligation to release publicly any revisions to these

orward-looking statements to reect events or circumstances ater the date o

this annual report or to reect the occurrence o unanticipated events, except

as may be required under applicable securities laws.

Introduction andfnancial highlightsThis is TNT’s annual report or the fnancial year ended 31 December 2008,

prepared in accordance with Dutch regulations. TNT delisted its American

Depositary Receipts rom the New York Stock Exchange on 18 June 2007,

and its reporting obligations with the United States Securities and Exchange

Commission terminated on 16 September 2007. TNT is thereore no longer

required to fle its annual repor t on Form 20-F.

However, where TNT thinks it is helpul, certain inormation is retained or

comparative purposes. In this way TNT intends to provide its stakeholders with

a clear overview o its fnancial year 2008.

Unless otherwise specifed or the context so requires, “TNT”, the “company”,

the “group”, “it” and “its” reer to TNT N.V. and all its group companies as

defned in article 24b, book 2 o the Dutch Civil Code.

TNT is domiciled in the Netherlands, which is one o the Member States o 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 reerred to as “€”.

As required by EU regulation, as o 2005 the consolidated fnancial statements

o TNT N.V. have been prepared in accordance with International Financial

Reporting Standards (IFRS) as adopted by the EU.

Selected fnancial dataThe selected fnancial data below have been derived rom the audited

consolidated fnancial statements o TNT N.V. and the related notes included in

chapter 6 o this annual report.

TNT has acquired a number o companies and businesses during the years,

which limit the comparability o it s year-on-year fgures.



Selected nancial dataYear ended and position at 31 December

2008 2007 2006 2005 2004

Statements o incomeTotal revenes 11,152 11,017 10,060 9,329 8,827

Other income 35 75 65 38 8

Salaries and social secrity contribtions (3,617) (3,608) (3,384) (3,318) (3,216)

Depreciation, amortisation and impairments (399) (349) (318) (303) (296)

Other epenses (6,189) (5,943) (5,147) (4,598) (4,213)

Total operating epenses (10,205) (9,900) (8,849) (8,219) (7,725)

Total operating income 982 1,192 1,276 1,148 1,110

Prot beore income taes 802 1,099 1,223 1,146 1,092

Prot or the period rom contining operations 560 783 828 770 720

Prot/(loss) rom discontined operations 0 206 (157) (109) 32

Proft attributable to the shareholders 556 986 670 659 752

RatiosOperating margin (%)1 8.8 10.8 12.7 12.3 12.6

Average nmber o otst anding shares (in millions) 363.6 383.0 420.7 454.4 473.4

Earnings per ordinary share (in cents)2 152.9 257.4 159.3 145.0 158.9

Earnings rom contining operations per ordinary share (in cents) 152.9 203.6 196.6 169.0 152.1

Earnings rom discontined operations per ordinary share (in cents) 0.0 53.8 (37.3) (24.0) 6.8

Average nmber o otst anding shares on dilted basis (in millions) 364.7 385.1 423.9 456.4 474.0

Earnings per dilted share (in cents)2 152.5 256.1 158.1 144.4 158.7

Earnings rom contining operations per dilted share (in cents) 152.5 202.6 195.1 168.3 151.9

Earnings rom discontined operations per dilted share (in cents) 0.0 53.5 (37.0) (23.9) 6.8

Dividend per share (in cents)3 71.0 85.0 73.0 63.0 57.0

Dividend pay-ot ratio (%)3, 4 46.4 33.0 45.8 43.4 35.9

Balance sheetsNon-crrent assets 4,730 4,823 4,277 3,663 5,070

Crrent assets 2,430 2,252 2,122 2,355 3,159

Assets held or sale 25 10 409 2,378 0

Total assets 7,185 7,085 6,808 8,396 8,229

Eqity 1,757 1,951 2,008 3,279 3,344

as % o total liabilities and eqity 25 28 30 39 41

Non-crrent liabilities 2,756 2,232 2,112 1,608 2,221

Crrent liabilities 2,672 2,902 2,542 2,279 2,664

Liabilities related to assets classied as held or sale 0 0 146 1,230 0

Total liabilities and equity 7,185 7,085 6,808 8,396 8,229

Cash fow statements

Net cash rom operating activities 923 643 857 969 690Net cash sed in investing activities (257) (8) 1,068 (262) (266)

Net cash sed in nancing activities (458) (635) (2,152) (768) (298)

Changes in cash and cash equivalents rom continuing operations 208 0 (227) (61) 126

Net cash rom operating activities 0 (19) (63) 43 268

Net cash sed in investing activities 0 4 (30) (22) (24)

Net cash sed in nancing activities 0 16 36 8 (202)

Changes in cash and cash equivalents rom discontinued operations 0 1 (57) 29 42

(in millions, nless otherwise stated)1 – Operating income as percentage o total revenes.

2 – Prot attribtable to shareholders divided by the average nmber o (dilted) ordinary shares.3 – Dividend per share or 2008 is calclated on the basis o the cash dividend o €34 cents per share and the proorma vale o €37 cents or the proposed share dividend o one share

or every orty s hares to be paid ot o distr ibtable reser ves and based on the volme weighted average share price o 11-13 Febrary 2009 (€14.66).

4 – Dividend as percentage o earnings per share (EPS).



Annual report 20082

The inormation in this annal report, and in particlar in chapters

2, 3, 4, 5, 7 and 10, shold be read in conjnction with the consolidated

nancial statements that can be ond in chapter 6.

The report o the Board o Management is inclded in chapters

2, 3, 4, 5, 7 and 10.

This annal report can also be viewed on TNT’s corporate website:

grop.tnt.com.

Any inormation on the website other than the contents o this annal

report does not orm part o TNT’s annal report.

Investing in TNT’s secrities involves risk. Carelly consider the

risks set ot in chapter 13 o this annal repor t.



Annual report 2008

chapter 1 From the CEO 5

Report o the Board o Management on thecorse o aairs o the company in 2008

chapter 2 Company strategy and general bsiness contet in 2008 7

chapter 3 Strategic progress and bsiness perormance in 2008 14

chapter 4 The Epress division 32

chapter 5 The Mail division 39

chapter 6 Financial statements 47

chapter 7 Board o Management compliance statement 109

Remneration

chapter 8 Remneration 114

Report o the Spervisory Board

chapter 9 Report o the Spervisory Board 122

Governance, reglation, investor relations and risks

chapter 10 Corporate governance 130

chapter 11 Reglatory environment 138

chapter 12 Investor relations, shares, dividendand shareholder retrns 142

chapter 13 Risks 147

CONTENTS



Annual report 20084

From the CEO

chapter 1

TNT’s Board o Management. From let to right: Harry Koorstra, Marie-Christine Lombard, Peter Bakker en Henk van Dalen.



FROM THE CEO

Annual report 2008

chapt

Navigating the perect storm

Dear readers,It is clear that all is not well with the world. We are in the midst o an

nprecedented nancial crisis combined with a harsh economic recession. And

yet it is not jst the economy that is in troble. O all the global isses the price

o oil and measres reqired to prevent a climate crisis will most likely contine

to impact or bsiness.

Or report on 2008 contains two separate docments: in this annal repor t

we report mainly on or bsiness and nancial perormance. In or corporate

responsibility report, pblished at the same time as or annal report, we

provide inormation on many o the non-nancial elements o or bsiness, like

or people, integrity, energy and climate perormance.

Financial and operational perormanceSo how did TNT per orm dring a year in which “a per ect storm” hit globally

aecting all sectors o bsiness and most geographies? Stock echanges across

the world have gone throgh nprecedented declines and also the TNT share

has depreciated by 51%, largely in line with the Eronet Amsterdam. The

sdden decline in the economy and the speed o it has taken s all by srprise,

leading to two prot otlook adjstments in October and December o 2008.

Relative performance to Euronext Amsterdam (AEX)2008

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10

15

20

25

30

35

Source – Bloomberg Professional (own currency based)

TNT AEX

In Mail, the impact o the economy on the volme developments was mch

less visible. Mail volmes contined to decline in the Netherlands as a reslt

o mainly sbstittion by electronic alter natives as well as ongoing growth in

competitive networks, inclding or own VSP alternative network. We need

to make the TNT Post activities in the Netherlands ready or ll liberalisation.

For this reason we contined discssions with the nions abot a new collective

labor agreement (CLA). For the rst time since 1984 this led to limited work

stoppages in several parts o the contry. Both parties agreed to adopt a new

one-year CLA, which will epire on 1 April 2009. Talks on a new prodction

CLA commenced in the latter part o 2008 and will likely bring abot a newCLA in the r st qarter o 2009.

The liberalisation o the Eropean mail market r ther reqires or continos

attention. The sitation srronding the nairly high minimm postal wage in

Germany contines to be nsatisactory and together with the nair VAT rles

provide real hindrance to the sccessl development o postal competition

in Germany. In the Netherlands the government conclded not all conditions

were met or a ll opening o the postal market per end o the year. Political

pressre to open the Dtch market in 2009 remains high.

In December, TNT epressed its interest to eplore a strategic partnership

with Royal Mail. Or interest was tr iggered by the pblication o the Hooper

Commission report, which recommends a strategic partnership with a private

sector company and sets ot a nmber o critical reqirements or a sstainable

tre or Royal Mail. We believe that a strategic partnership with Royal Mail

cold make a lot o sense or both or companies.

Or brand and the TNT employees’ can-do mentality has been captred in a

new strap line: “sre we can”. Internal workshops are being held to eplain its

meaning in the daily work o employees with cstomers and we are pdating

the orange livery o or vehicles and aircrat.

New corporate responsibility strategyIt is clear that in the crrent economic environment we will need to more than

ever manage or nancial per ormance. And yet it is or view, that in the crrent

age a company cannot be led anymore jst ocsing on its nancial per ormance

alone. In order to perorm well, to attract and motivate the people in or

workorce and retain or licence to operate we need to broaden or ocs on

all stakeholders o the company.

For this reason, we have reviewed and pdated or corporate responsibility

(CR) strategy in 2008. Corporate responsibility combines sstainability, which

ocses on the environment, and corporate social responsibility, which dealswith or people, or cstomers, or investors and society as a whole. The TNT

CR strategy nderlines or rm resoltion to contine to strive or responsible

leadership.

Looking ahead to 2009More than any other year in the rs t decennim o TNT’s eistence 2009 will

be a challenging year. TNT will ocs its eorts arond “si C’s”.

The rst C stands or Customers. We need to keep in very close toch with

or cstomers in this economic downtrn, monitor their problems and needs

and try to assist them in every way we can, by coming p with proposals and

innovative soltions that will allow them to se or services in the most cost

ecient manner possible. This way we can weather the storm together.

Looking at or bsiness perormance in Epress, the year started ot in line with

the trends rom the last qarters o 2007. In Jne 2008, or Epress air volmes

started to decline and we witnessed rt her declines o volmes in September

and rom November onwards. An increasing nmber o or cstomers either

lowered their otpt or decided to move their consignments ot rom or air

network and into or road network or slower delivery at a lower cost, both

trends adding p to a particlar ly negative impact on volmes in or air network

althogh rom November also or road volmes in Erope showed a clear

decline. Network optimisation programmes have been implemented to ct

costs to adjst or the volme declines, bt given the speed and nprecedented

levels o declines, signicant pressre on prots in Epress was navoidable.



Annual report 20086

From the CEO

chapter 1

The second C stands or Cost. The challenge is to eectively manage costs to

oset the volme decreases in Epress and Mail. This challenge will be biggest

or Epress, as this division will most probably contine to ace volme declines

in its networks. Epress will have to consider its entire cost strctre and not

rle ot any cost saving measre, inclding decommissioning part o its air feet.

In 2009 strctral cost savings o €90-125 million are to be achieved, mostly

to come rom rther network optimisation in networks and centralisation

o cstomer services. In addition, Epress is targeting to implement rther

variable cost saving measres p to an amont o abot €200 million o savings

in 2009 to cope with epected volme declines.

In Mail cost ctting has been on the agenda or some teen years now. As a

conseqence o the impact o electronic media on the demand or mail ser vices,

TNT anticipates that the mail volme decline cold rise to arond 6% annally in

the period to 2012. This necessitates additional cost management programmes

on top o the eisting Master Plans that were annonced in 2006 and aim to

realise €395 million o annalised cost savings by 2015. TNT has started work

on a complete redesign o its Dtch mail network - called Master Plan III – that

aims to deliver a rther €200 million annal savings in the tre.

The third C stands or Cash. In 2009 we will have to ocs on carel cash

management. The economic crisis means that cash is a scarce resorce, which

needs to be treated with prdence. At the end o 2005 – as part o or Focs on

Networks strategy – we have begn to optimise or capital strctre. Over the

last three years more than €3.2 billion has been retrned to or shareholders.

We dened an optimal capital strctre or TNT at an investment grade BBB+

credit rating, which in the mean time we have now achieved. The aim o or

cash fow management is to maintain or crrent strong nancial position.

Especially in the ncertain and declining economic environments in which we

now operate a prdent approach to all or stakeholders is essential.

The orth C stands or Care. As a people company we aim to create a

workplace where a diverse set o people are engaged, rewarded competitively,

work in a sae place, are treated eqally, can speak p reely and will be

responsible and accontable. However, de to the economic downtrn and

the changing environment in the mail market we will have to shrink some

parts o or operations. We will do or best to ensre any remneration

adjstments or job losses will be dealt with in a socially responsible manner.

In this contet we have also ond it appropriate to adjst top management

remneration to a signicantly lower overall level. Care also captres all or

volntary contribtions and activities, like or partnership with WFP. These

are what makes s a special company, a company that people like to work or

and are prod o. We will remain committed to this ndamental part o or

company’s vales.

The th C stands or Climate. The economic downtrn notwithstanding

TNT mst contine its qest to redce its CO2

ootprint. Later this year the

leaders o the world will gather in Copenhagen to decide on tre reglation

to combat the climate change globally. We need to prepare or bsiness model

or long term rising oil prices and the possible introdction o carbon pricing, as

well as test new technologies that can clean p or operations.

The sith and nal C s tands or Confdence. When we look at the operating

environment the world is in, glance over the challenges set ot above it cold be

easy to become disheartened by them. Easy, bt wrong. It is my rm conviction

that we can overcome all these challenges. At TNT we are not believers in

doom; at TNT we are can-do people.

At the end o this letter I wold like to thank a nmber o people. Firstl y I wold

like to thank Mr Jan Hommen, who has gided s as chairman o the Spervisor y

Board or the past or years and who has now given over to or new chairman,

Mr Piet Klaver.

To all or people, and in particlar the members o or works concils and

orther employee representative bodies, I wold like to say thank yo or all

yor energy and commitment to TNT. Times are not easy, bt together we can

srmont the obstacles and come ot stronger. Sre we can!

Wishing yo all the best, on behal o my colleages in the Board o

Management,

Peter Bakker, CEO

Hooddorp, the Netherlands

16 Febrary 2009



REPORT OF THE BOARD OF

MANAGEMENT ON THE COuRSE OF

AFFAIRS OF THE COMPANY IN 2008

Annual report 2008

chapter 2 Company strategy and general bsiness contet in 2008 7

General 7

Mission and strategy 7

Indstry contet 8

Bsiness contet, vision and strategy 10

chapter 3 Strategic progress and bsiness perormance in 2008 14

Strategi c progress 14Portolio development 14

Mail consolidation and interest in Royal Mail 14

General economic and bsiness environment 14

Cost savings measres 16

Financial policy 16

Cstomers 18

Hman resorces (HR) 19

Brand 21

Corpora te responsibi lity 21

Revenes and earning s grop 25

Net assets and nancial position grop 29

chapter 4 The Epress division 32

General 32

Strategy and actions 32

Bsiness perormance 33

Financial reslts 36

chapter 5 The Mail division 39

General 39

Strategy and actions 39

Bsiness perormance 41

Financial reslts 44

chapter 6 Financial statements 47

Inde – to nancial statements o TNT N.V. 48

Notes to the consolidated nancial statements 53

Notes to the consolidated balance sheets 61

Notes to the consolidated statements o income 74

Notes to the consolidated cash fow statements 85Additiona l notes 87

Notes to the corporate balance sheets and statements o income 103

Other inormation 107

chapter 7 Board o Management compliance statement 109

Risk management, internal control, integrity and compliance systems 109

Direc tors’ responsib ility statement 111



COMPANY STRATEGYAND GENERAL BuSINESS

CONTExT IN 2008Annual report 20087

chapter 2

COMPANY STRATEGYAND GENERAL BuSINESS

CONTExT IN 2008GeneralTNT N.V., throgh its two divisions, Epress and Mail, is part o the global

transportation and distribtion indstry, and dedicated to providing delivery

soltions to its cstomers. The global transportation and distribtion indstry

is a vast indstry whose market size is estimated to be over uS$3,500 billion.

TNT serves more than 200 contries and employs arond 163,000 people.

Over 2008, TNT reported €11,152 million in revenes, an operating income

o €982 million and cash rom operating activities o €923 million. TNT N.V. is

listed and traded on Eronet Amsterdam by NYSE Erone t (ticker “TNT”).

TNT is strongly committed to responsible corporate citizenship and

implements varios international standards in order to retain its “licence to

operate” in the broadest sense. TNT measres, benchmarks and reports its

perormance. Simltaneosly with this annal report, TNT is pblishing its

corporate responsibility report. Corporate responsibility is also inclded in this

annal report, see chapter 3.

On 11 April 2008, TNT held its annal general meeting o shareholders at

Schiphol-Rijk, the Netherlands. The attendance rate was 48% o the total

otstanding share capital, p rom 32% in 2007. Dring the annal general

meeting o shareholders all proposed resoltions were adopted, inclding the

etension o athority to isse shares.

Mission and strategy Mission statementTNT’s mission is to eceed its cstomers’ epectations in the transer o their

goods and docments arond the world. TNT delivers vale to its clients by

providing the most reliable and ecient soltions throgh delivery networks.

TNT aims to lead the indstry by:

instilling pride in its people, –

creating vale or its shareholders, and –

sharing responsibility or the world in which it operates. –

Bsiness descriptionTNT is in the bsiness o transerring goods and docments arond the world

tailored to its cstomers’ reqirements with a ocs on time-certain and/or day-certain pick p and delivery. It is TNT’s bsiness to deliver the “bsiness” o

its cstomers at the right time and at the right place.

TNT picks p, transports, sor ts, handles, stores and delivers docments, packets,

parcels, and reight by combining physical inrastrctres sch as depots and

trcks, electronic inrastrc tres sch as billing and track-and-trace systems,

and commercial inrastrctres to attract, ser ve and retain cstomers.

Goods and docments have dierent weights, shapes and sizes. They can be

as light and small as a postcard or they can be as heavy and big as the engine

o a jmbo jet. They can also change shape, sch as when several parcels are

combined into a single pallet, and they can have dierent reqirements in terms

o speed o delivery, secrity and point o delivery. Goods and docments can

have very dierent distance characteristics, ranging rom domestic to cross-

border/regional to intra-continental to intercontinental.

In general, weight and speed are most commonly sed to characterise dierent

kinds o cstomer reqirements. This is illstrated in two-dimensional charts

sch as the one shown below, where the weight categories are below one

kilogramme (docments), between one and 30 kilogrammes (parcels) and

above 30 kilogrammes (pallets, ll loads and blk) and the speed categories

are same-day, time (and day) certain (e.g. 10:00 net day), day-certain/1-2 days,

day-certain/3-5 days and day-ncertain.

Global transportation industry – segmentationMarket size: approximately US$ 3,500 billion

Day-uncertain

Documents Parcels Pallets

Freight

Full Loads Bulk

Time-certain

Day-certain

(3-5 days)

Day-certain

(1-3 days)

Same-day

D e f e r r e d

Mail1st class

Couriers

Mailother

Standard parceloperators

Trucking companies

Freightforwarders

Seacarriers

Integrators

1 kg 30 kg 250 kg 1.000 kg 20.000 kg

Adjacent service and infrastructure providers

Source – R.W. Baird, report ‘global Integrators’, January 2007

All these dierent types o reqirements need dierent delivery networks

and are served by dierent operators (see chart above). These range rom

very ecient and time-sensitive (air and road) epress networks operated

by integrators to less epedited sea carriers. Freight forwarders operate virtal

networks, sing block space on other operators’ planes, ships and (to a lesser

etent) trcks, and their own depots and sites in harbors and at airports.

Couriers ocs on same and (intercontinental) net day delivery with a ocs

on light weights. Finally, in the widest sense, peripheral operators sch as

inrastrctre providers (port authorities, airport operators, motorway owners),

consultants and software companies can also be considered as par ticipants in

this sector.

Focs on Networks strategy TNT’s strategy is to ocs on providing delivery soltions by epertly managing

delivery networks. TNT calls its strategy “Focs on Networks”. This strategy

was rst presented in the orth qarter o 2005, contains manageable

eection risks, and is based on TNT’s core strengths, with the objective o

achieving protable growth. For more inormation on risks, see chapter 13.

In the rst phase o its Focs on Networks strategy, TNT concentrated on

transorming its ondations by eiting its logistics and reight management

activities, concentrating on (Mail and Epress) mlti ser networks and

optimising its capital strctre.

Since the start o the second phase (called “Grow and Bild Vale”) in

December 2007, the emphasis is now on rther s trengthening and actively

maintaining the core o the portolio (Epress Erope and Mail Netherlands)

and accelerating the bild-p o the emerging platorms in Eropean Mail and



Annual report 2008

Company strategy and general business context in 2

chapt

Parcels and Epress emerging bsinesses. In addition, other “ delivery soltion

opportnities” sch as deerred services and niche soltions or specic client

sectors are being ac tively developed (see chart below).

TNT’s portfolio of networks

Actively maintain

Cash generation Growth & cash Value creation Value creation

Explore& build

Grow /invest

Buildfast

Strategic Focus

Financial Focus

Asia Pacic

Rest of the World

Special Services

European MailNetworks

Mail Netherlands& other

Master plans

Increaseroad-based /

deffered

Cost savings /cost structure

Enhanceintercontinental

connectivity

Expand inEmerging Platforms

Broader EUapproach

Domestic ExpressEurope

Incumbentconsolidation EU

International ExpressEurope

Mail growthinitiatives

Sector specicpropositions

Parcels

Maintain

Broaden productportfolio

Existing business

New business development

Initiatives within existing business

TNT’s networks are in dierent development phases and oer a range o

growth opportnities. TNT’s most matre bsiness is its Mail network in the

Netherlands, where TNT actively seeks to maintain its market leadership in a

declining market with increasing competition. TNT’s Epress networks in Asia,

in particlar in India, China and Soth-east Asia, and in selective other emerging

markets, sch as Brazil, are at the other end o the spectrm and are among

the least matre networks in its portolio. In these geographies TNT can be

leading in shaping the market by strongly growing its road networks and so

attain market leadership. In Erope, TNT contines to grow its Epress andMail networks by bilding on its eisting strong position. TNT aims to accelerate

growth in its networks organically, as well as throgh selected acqisitions.

TNT has a port olio o delivery soltion bsinesses and it leverages its strong

brand across all activities arond the world.

The essence o TNT’s bsiness model is to operate mlti-client delivery

networks. TNT’s aim in each o these networks is to achieve cost and service

leadership throgh scale and continos network optimisation. In addition,

largely dedicated networks, or instance or Fashion, Health and Docment

epress deliveries, are managed and rther developed.

Indstry contet

GeneralTNT believes the ollowing trends will be increasingly relevant to its bsiness

over the net ve to ten years:

Economy

The global economic crisis will aect the overall consmption in the world,leading to lower volmes being transported.

EnvironmentThere is growing consenss amongst the general pblic, politicians and others

that climate change is threatening the environment. Increasing levels o carbon

dioide (CO2) in the atmosphere are trapping more heat, ths increasing global

temperatres. This phenomenon, reerred to as global warming, will give rise

to all sorts o measres and reglations that try to abate the CO 2 emissions

arond the globe. Since transport and distribtion contribte nearly one-th

to these emissions, the transport and distribtion indstries will be aected

signicantly by any measres or reglations. TNT has responded pro-actively to

this challenge by lanching its Planet Me initiative. More details on Planet Me can

be ond in TNT’s 2008 corporate responsibility report.



Annual report 20089


chapter 2

Demographic trendsDemographic trends are changing the composition o the poplation across the

globe. For eample, in the largest Western Eropean contries it is estimated

that between 20% and 25% o the poplation will be above the age o 65 by

2020. Also, people will live increasingly in cities with more than ve million

inhabitants (so-called megacities), posing signicant distribtion challenges.

As a reslt o the ageing poplation, spending on healthcare will increase

signicantly. In addition, there is a trend towards more biopharma prodcts and

an increased need or special handling services in healthcare.

These trends have several implications or the transportation and distribtion

indstry, sch as accelerated growth o healthcare prodct fows, an increasing

demand or to-consmer distribtion networks, and possibly more challenges

in attracting and retaining sta.

Restructuring o global supply chainsDriven by globalisation, mltinationals contine to move their manactring to

contries with low-cost labor sch as China. With an increasing middle class

in the emerging contries, spending in those markets will rise, driving regional

transportation and global fows as well. In contrast, environmental concerns

may eventally lead to a renewed regionalisation o manactring and regional

“sel sciency” models.

DigitisationDigitisation is a trend that TNT has aced or qite some time. As a reslt o

continosly improving technologies, docments can be digitised, transmitted

and reprodced withot reqiring delivery o the printed material. Digitised

design o goods and services as well as globalisation o prodct development

and promotion will also infence delivery reqirements.

Epress marketsCompetition in the epress market ocses on network coverage, speed,

reliability, qality o cstomer service as well as price. There are essentially two

types o epress players: the global integrators and the local/regional epress

players. The or global integrators are uPS, FedE , DHL, and TNT. Standard

parcels operato rs (oten related to postal incmbents) and Less-Than-Trckload

(LTL) operators can be seen as potential new sb-regional entrants. Larger

players can achieve attractive margins throgh economies o scale and (to a

lesser etent) scope. Local and regional players ocs on high local network

density.

The epress sector has signicant barriers to entry, mainly the reqired scale

and network reach, ICT capabilities, investments in ed assets, brand name,

and reptation. New entrants may come rom the parcel and reight sectors

where companies might improve their oerings to day-denite prodcts. This

cold increase price competition.

TNT ses a clear epress market denition to clariy its position within the

sector. This epress market denition encompasses time-certain, net-day and

astest by air or road day-certain delivery or bsiness-to-bsiness consignments

transported throgh a schedled network, with door-to-door track-and-trace

o individal items/consignments. For 2007, TNT estimated the size o this

market in Erope to be approimate ly €21 billion. TNT consolida ted its market

leadership in Erope with a market share o 18%, ollowed by DHL (16%), uPS

(9%) and La Poste (7%).

Eropean epress market (eclding intercontinental):

16% DHL

43% Other

18% TNT

9% UPS

7% La Poste

5% Royal Mail2% FedEx

Market shares Europe

Based on inormation and analysis o competitors across several market

segments in varios contries dring ve years, TNT estimates the potential

addressable market in Erope at approimately €50 billion. In addition to the

Eropean epress market, this potential addressable market incldes a wider

range o services sch as intercontinental fows between Erope and the rest

o the world, deerred services, corier services and vale-added services. The

total size o TNT’s targeted market within this broader market is €35 billion,

which ecldes indstry segments t hat are non-ocs to TNT (e.g. chemicals

and base materials). TNT can epand in the targeted indstries with e tended

service oers (see chart).

Intra-European express market

Intercontinental

Deferred services

Courier

Value-added services

Total relevant market

Non-focus industry

Total targeted market

Based on information and analysis during 5 years of 423 unique competitors,

across 29 market segments and 31 countries.

50

15

4

5

17

3

21

35

Size of European B2B Market 2007in € billion

Key vale drivers or the epress market can be broken down into three categories:

growth, pricing, and cost. The main driver s or growth in the epress market are in

principle GDP development and increasing globalisation o spply chains. Important

pricing drivers are consolidation, intensiying competition and costs o el

throgh srcharges. Key cost drivers are ronds and stops in pick-p and delivery,

kilometres travelled in linehal and manhors in hbs and warehoses. Most o

these costs are adjstable over time as they are in the majority sbcontracted,

bt cost developments will depend on volmes, atonomos increases, network

optimisation possibilities and reqired step-ps in investment.



Annual report 2008


chapt

Mail marketsThe mail sector has its historical roots in a national service that was provided

by government organisations to assre commnication in a contry. In most

contries the sector is highly reglated, with an incmbent in a protected,

monopoly position. However, in Erope the sector is being liberalised step by

step. On 20 Febrary 2008 the Eu pblished a new Postal Directive, conrming

that the main part o the market shold be liberalised by 2011, with a lly

liberalised market throghot the Eu in 2013 at the latest. At this moment,

the united Kingdom, Germany and Finland have ormally liberalised their mail

markets. However, in practice, reglation makes it diclt or new marketplayers to actally enter these markets.

As the mail sector has no natral barriers to entr y, competition is developing

rapidly in contries where real liberalisation is taking place. In particlar in

the Netherlands, two nationwide postal competitors are active net to the

historical incmbent TNT Post. However, in most contries governments

24% Other 20% Germany

20% UK

6% Italy 19% France

5% Netherlands

3% Belgium

2% Austria1% CEE

1 – Other includes other (to be) EU countries, Norway and Switzerland

2 – Central and Eastern Europe

25% Other 19% Germany

18% UK

7% Italy 20% France

5% Netherlands

3% Belgium2% Austria

1% CEE

European addressed mail market

Revenue € 56 billionVolume 102 billion pieces

have moved to protecting their national operator one way or the other, and

create reglatory barri ers to entry (see chapter 11 or more details). As a reslt,

many Eropean markets still contine to be dominated by the incmbent, with

challengers holding a small, bt slowly growing, market share.

As a reslt o new commnication technologies , the mail market as a whole is in

decline. Volmes are dropping in most contries in Erope, with the s trongest

decline in those contries that have the highest level o internet penetration

in hoseholds. The dependence on mail or commnication, and as a reslt the demand rom cstomers or a net-day mail delivery service, is changing.

This makes way or new market players, oering a less reqent bt more

economical service than the historical daily delivery the incmbents are legally

reqired to provide. The mail market environment is in a phase o ndamental

transormation.

TNT takes dierent positions in these markets, the size o which is estimated

at 102 billion items and at €56 billion revene or Erope (see chart). In the

Netherlands, TNT is the historical incmbent that has to manage the decline

o its market share, which market share is estimated at 86% in 2008. In other Eropean contries, TNT takes the challenger position. TNT estimates its

market share in volme in the addressed mail market at 3% in Germany, 12%

in the united Kingdom and 2% in Italy. For the smaller contries in which TNT

is active (Astria, Belgim, Czech Repblic and Slovakia), the market share is

arond 1%. In naddressed mail, TNT’s market share is arond 7% in Germany,

13% in the united Kingdom, 31% in Italy and arond 55% in mentioned smaller

contries.

Bsiness contet,vision and strategy

EpressThe Epress bsiness is one o high b t cyclical growth. Several market trends

shape the tre o Epress:

signicantly above-GDP growth rates in most segments o this market de –

to continos o-shoring to low-cost contries, and rther otsorcing o

in-hose transportation, vale-added services and logistical activities.

a strctral shit towards deerred/economy prodcts (road, rail-based) de –

to increased environmental ocs, stronger cost ocs, and increased energy

costs. The crrent economic climate amplies this strctral trend.

increased demand or global door-to-door delivery and integration o total –

spply chains (across dierent modes o transport).



Annual report 200811


chapter 2

The vision or the TNT Epress clster o bsinesses is to achieve a sstainable

leading position in Erope and the emerging markets by epanding and cost

optimising the dense domestic and r egional pick-p and delivery and regional

linehal networks, whilst contining to strengthen the bsiness throgh

etending the ser vice windows in all weight classes and or all sectors.

The TNT Epress strategy ollows this vision, ocsing on the ollowing or

elements:

seek higher-than-market growth by epanding to an oering that encompasses –

a range o time-based service windows or a ll range o weight classes,manage the costs down throgh optimising the networks and overhead costs –

to cater or the crrent poor economic environment and lower volmes in

the network, in particlar in the air network in Erope,

gain market share and scan or local acqisition opportnities to strengthen –

the core whilst at the same time redesigning TNT’s own networks to deal

with the changing demand patterns o its cstomers, and

contine to epand the niqe domestic (road based) positions in the largest –

emerging markets.

More details on Express can be found in chapter 4 .

MailThe Mail bsiness is a matre-to-declining clster o bsinesses that constantly

needs to adjst itsel to changing volmes and emerging competition. Three

market trends dene the tre o the Mail bsiness:

changing commnication patterns ollowing digitisation, –

increasing competition in Erope de to liberalisation, and –

consolidation as a reslt o liberalisation. –

Whilst the rst trend reslts in volme decline, the other two trends create

growth opportnities or TNT otside the Netherlands.

The vision or the TNT Mail clster o bsinesses is to become a leading

Eropean mail company that leverages its core strengths in cost and reglation

management or mail and related activities and that grows new bsinesses in

core geographical markets bilding on assets, brand and capabilities.

The TNT Mail strategy ollows this vision, ocsing on ve elements in parallel:

manage cost and sales in the Dtch operations throgh Master Plans and –

prepare or alternative bsiness models to adjst to the changing market

sitation,

where reglation allows, grow the challenger position o TNT Post otside –

the Netherlands throgh Eropean Mail Networks,se TNT’s deep epertise in cost eciently rnning mail networks as an –

opportnity or other incmbent mail operators,

more than dobling Parcels revene rom 2008’s €420 million by 2014 with –

a 10-12% operating marg in by bilding rom TNT’s sccessl Benel model

and by cooperating with Epress, and

leverage TNT’s brand and reptation to captre the digitisation trend –

by oering new prodcts in e-commerce llment, digital prodcts, and

nancial services.

More details on Mail can be found in chapter 5.

Financial strategy TNT’s nancial strategy is based on three pillars:

driving bsiness perormance by sing vale-based per ormance measres –

and standardisation o bsiness processes,

maintaining the right nancial feibility to spport growth platorms via –

capital ependitre and mergers and acqisitions, and

keeping the capital strctre ecient and strong, at an investment grade –

long term credi t rating o “arond BBB+”.

These three key components o the nancial strategy directly relate to:eective risk management, internal control, integrity and compliance, –

nancial risk management and risk insrance strctres, –

aligned legal and nding strctres, and –

a balance in short and medim term shareholder retrns throgh protable –

growth, dividends and incidental share reprchases or other shareholder

retrns rom medim term ecess cash.

TNT’s crrent capital strc tre is based on and managed along the ollowing

components:

maintaining a credit rating at investment grade “arond BBB+”, –

availability o at least €500 million o ndrawn committed acilities, –

strctral nding via a combination o pblic and bank debt, with a –

risk-weighted mi o ed and foating interest,

cash pooling systems acilitating optimised cash reqirements or the grop –

by acilitating centralised nding and srpls cash concentration at grop

level, and

a ta optimal internal and e ternal nding ocsed at optimising the cost o –

capital or the grop, within long term sstainable bondaries.

TNT’s crrent long term credit ratings are BBB+ (stable otlook) or Standard &

Poor’s Ratings Services (S&P) and A3 (negative otlook) or Moody’s Investors

Services (Moody’s). These credit ratings reslt rom an evalation and analysis

o many dierent actors. As mentioned, TNT ocses on maintaining an

investment grade credit rating o “arond BBB+”. For this prpose it monitors

the development o the key credit ratios which are sed by rating agents and

which may vary rom time to time:

Fnds From Operations (FFO) / Debt, whereby the FFO is based on –

operating prots rom contining operations, ater t a, corrected or, among

other things, depreciation and amortisation and other major non-cash items,

and Debt is dened as total interest-bearing borrowings o the company,

adjsted or on and o-balance sheet debt-like components and srpls cash

(as sed by S&P),

Debt / EBITDA, whereby EBITDA is dened as operating prots beore – interest and taes, corrected or, among other things, depreciation and

amor tisation as well as operating leases (as sed by both S&P and Moody’s),

FFO / Interest, whereby Interest is corrected or, among other things, –

pensions and lea ses (as sed by Moody’s),

Retained Cash Flow (RCF) / Debt, whereby the RCF is dened as FFO less –

dividend (as sed by Moody’s), and

Free Cash Flow (FCF) / Debt, whereby the FCF is dened as the RCF –

corrected or capital ependitres and changes in working capital (as sed

by Moody’s).

The weighted mi o the ratios above orms an important bilding block in

TNT’s nancial parameter ramework, whereby the crrent credit ratings

are roghly based on the ollowing ranges or the S&P ratios: an FFO / Debt



Annual report 2008


chapt

between 30%-35% and a Debt / EBITDA o 2.0-2.5. Moody’s has not

pblished a rating report on the basis o its new rating methodology that was

introdced in December 2008. Thereore, at the moment, indicative ranges are

not available nder this new ramework or the mentioned or ratios. Its most

recent rating report is based on the old ramework and gives a range or Debt

/ EBITDA below 3.0 and an RCF / Debt above 17%. These ranges per ratio

as indicated by the rating agents may change over time, depending on market

conditions and analytical considerations.

For its nancial reqirements in the contet o its capital strctre components,TNT works with approimately nine relationship banks. This nmber is

infenced by nancial service reqirements o TNT related to its global spread

in activities, bsinesses and legal entities.

Cash reqirements or capital ependitre fctate rom year to year,

depending on the etent o strategic capital projects, bt have been well

covered by operating cash fows. The ratio o cash rom operating activities to

net capital ependitre was 3. 2 in 2008, 2.6 in 2007 and 3.1 in 2006. This ratio

is calclated as ollows: net cash provided by operating activities pls interest

received, divided by the sm o capital ependitre on other intangible assets,

disposals o other intangible assets, capital ependitre on property, plant and

eqipment and disposals o property, plant and eqipment, all as stated in TNT’s

consolidated cash fow statements. TNT epects these operating cash fows

to contine to cover its capital ependitre reqirements in the oreseeable

tre. TNT believes its bsinesses also generate scient liqidity to cover its

working capital reqirements.

TNT aims to grow its Free Cash Flow in the medim term. TNT denes it s FCF

as the net Cash From Operating Activities pls interest received, mins capital

ependitre on property, plant, eqipment and intangible assets, pls proceeds

rom sale o smaller assets.

Part o the cash fow is sed or paying dividends that reslt ater the

appropriation to the reserves o (part o) the prot. TNT tries to meet

shareholders’ retrn reqirements long term throgh growth in the vale o

the company, and short term throgh dividends and, incidentally, ta eempt

share reprchases or other retrns rom ecess cash. Following its dividend

gidelines, TNT intends to pay interim and nal dividends annally in cash

and/or shares. The TNT Reserves and Dividend Gidelines can be viewed on

TNT’s corporate website, grop.tnt.com. In 2007, TNT annonced its intention

to increase the dividend pay-ot rom arond 35% over 2006 o normalised

net income to arond 40% by 2010, barring any noreseen circmstances.

Normalised net income is dened as prot attribtable to the eqity holders o the parent adjsted or signicant one time and special items.

For any acqisitions that eceed the company’s immediate cash resorces,

the company wold seek to raise capital in the nancial markets by means

o bank borrowings and private or pblicly traded debt. For very sbstantial

transactions, i reqired TNT wold also consider issing hybrid debt or eqity

in order to maintain an investment grade “arond BBB+”. Given the strength

o TNT’s nancial position, credit ratings, and bank relationships, TNT nder

normal market circmstances does not oresee an inability to access a wide

range o capital markets inclding eqity, pblic debt, private debt and bank

borrowing. TNT monitors and manages key nancial ratios that are consistent

with a strong credit rating. There are no aspects o TNT’s crrent capital

strctre that TNT believes wold trigger a material increase in the cost o its

debt or the inability to access capital markets.

For details on the interest rates charged on TNT ’s more signicant long term

loans as well as the matrity o TNT’s long term loans and commitments, see

notes 12 and 28 to the consolidated nancial st atements o TNT N.V.

TNT does not hold or isse nancial instrments or trading prposes, nor

does TNT allow its sbsidiaries to do so. For details on TNT’s se o nancial

instrments, see notes 3, 6, 12, 13, 29 and 30 to the consolidated nancial

statements o TNT N.V.

TNT operates a comprehensive insrance policy covering its operational risk

prole as appropriate, sing a mi o sel insrance, reinsrance, and direct

eternal insrance.

As reqency losses (sch as cargo and vehicle claims) are o an operational

and cstomer service natre, TNT believes that or part o these losses sel

insrance is the best method to motivate operational nits to address the

nderlying cases o these losses. TNT’s total sel insred reqency claims are

strctred via an in-hose captive insrance company and capped on an annal

basis via reinsrance. Dring 2008, TNT’s total annal retention cap on these

losses was €5 million.

TNT’s “catastrophe eposres” are insred in the traditional insrance markets.

These inclde aviation, property and bsiness interrption, general liability,

rad, and director and ocers’ liability insrance. TNT has a strict policy to

transer ris ks only to insrers with a rating o A- or higher, and this is monitored

on an ongoing basis.

Attention is being given to adjst TNT’s insrance protection to the

ever-changing legal and reglatory environment in which it operates, and all

insrance policies are thereore tailor-made to TNT’s niqe reqirements.

In addition, crrent insrance arrangements also need to spport strategic

developments and the changing risk prole o the company.

TNT’s nancial strategy and actions will take into accont the key componentso its nancial solidity reqirements as mentioned.



Annual report 2008



AND BuSINESS

PERFORMANCE IN 2008Annual report 2008

chapt

STRATEGIC PROGRESSAND BuSINESS

PERFORMANCE IN 2008Strategic progressDring the year TNT has made good progress in implementing the second

phase (Grow and Bild Vale) o its Focs on Network s strategy. In Epress the

integration o the companies acqired in the period 2005-2007 contined and

was largely completed. Also, the rther development o the road networks

TNT is bilding across the globe contined, witness or eample the start o the

only schedled road services between China and ve contries o Soth-east

Asia, sing TNT’s Asian road network. In Mail, the implementation o Master Plans remained on track, Emerging Mail and Parcels again showed strong

growth despite the di clt economic conditions, and new growth platorms,

or eample in e-delivery, were developed.

Portolio developmentIn 2008, TNT contined to eplore opportnities to etend the scope o

its portolio. These eplorations consisted o natral etensions o TNT’s

core capabilities (sch as new growth initiatives in Mail Netherlands in the

e-commerce area), additional growth opportnities rom adjacent bsiness

models (sch as deerred prodcts in Epress) or the oering o new sector-

specic network-based soltions (see chart).

TNT’s portolio ths aims to provide a continm o delivery soltions that

“dove-tails” the Epress and Mail divisions. This portolio allows TNT to optimise

operational activities as well a s management and competence development

across the company. TNT maintains its view that its crrent bsiness port olio

is right or the short, medim and long term. The original portolio logic o

achieving a balanced mi o cash generation and growth bsinesses, with shared

capabilities, remains valid and is even strengthened by the crrent economic

and nancing environment. Thereore, rather than contemplating, or eample,

divestment o one o the core bsiness blocks, which wold likely destroy vale

given today’s economic environment, TNT’s Board o Management is ocsed

on improving operations, captring smart market opportnities and drive long

term vale.

Network-based solutions

Express

Light Heavy

Slow

Fast

Weight

Speed

Mail

Economy & coverage

New delivery solutionsE-commerceBusiness-to-Consumer

Mail consolidation andinterest in Royal MailOver the past ew years TNT’s strategy to grow its mail activities otside

the Netherlands consisted o a dal track approach: developing networks or

naddressed and addressed mail distribtion as an alternative to the incmbent

mail operator and eploring opportnities to participate in the epected

Eropean postal consolidation by cooperating with other postal operators (e.g.by taking part in privatisations o sch operators).

In this respect, TNT epressed its interest to eplore a strategic partnership

with Royal Mail in December 2008. The Hooper Commission report, which

set ot a nmber o critical reqirements or a sstainable tre or Royal Mail,

triggered TNT’s renewed epression o interest.

The objective o the par tnership wold be to contribte to developing Royal

Mail into a modern, best-in-class postal operator that combines ecellent mail

service with solid and sstainable nancial perormance as part o a broader

global network. The scope o a potential partnership wold eclde post oce

retail otlets given its pblic service network nction. A str ategic partnership

wold be o interest to TNT given the potential vale creation rom cooperation

in both mail and parcels.

TNT proposed to Her Majesty ’s Government to enter into discssions on a

strategic partnership with Royal Mail with the objective to reach agreement

on key terms and conditions or a sbstantial minority shareholding. TNT’s

proposal assmes the implementation o the key recommendations o the

Hooper Commission instrmental to a sstainable tre or Royal Mail.

General economic andbsiness environmentThe year 2008 saw the global economy enter into a severe recessionary phase,

deepening in Erope in the third and orth qarter s. The credit crisis and its

impact on the “real economy” led to an nprecedented drop in global market

capitalisation. TNT shares lost 51% o their vale dring 2008, in line with

general indicators or its indstry sector and the AEx o Eronet Amsterdam.

The oil price, o particlar importance to the transportation indstry, peakedat over uS$145 per barrel in Jly 2008 bt then qickly dropped to below

uS$50 per barrel as a reslt o decreased demand and the qickly deter iorating

economic conditions (see chart).




Strategic progress and business perormance in 2008

chapter 3

Crude oil spot pricesin US dollar per barrel

0

30

60

90

120

150

2008200720062005200420032002

Source – Bloomberg Professional

The GDP growth orecasts came down sharply in the second hal o 2008

(see chart), with the decrease accelerating into 2009, bringing major global

economies in a recession.

Development of consensus forecast GDP growth 2009

during the year in %

-3

-2

-1

0

1

2

3

DecNovOctSepAug Jul JunMay Apr Mar Feb Jan


The Netherlands

France

USA

Spain

Italy

Germany

United Kingdom

This sharp change in the economic environment had a sbstantial impact on

the reslts o TNT Epress in particlar. In 2008, TNT was orced to redce

its ll-year otlook or Epress twice, rst on 16 October and then on 4

December. TNT’s Mail activities contined to deliver robst reslts dring

2008, with a par ticlarly strong orth qarter (althogh positively infenced

by one-os).

TNT does not assme improvement in economic circmstances in 2009. TNT is

thereore adapting and aligning its strategic short term ocs areas to strengthen

the company throgh the recessionary phase in the global economy, whilst

remaining alert to new growth opportnities provided by its strong platorms.

A ocs on aggressive cost savings measres is combined with a ocs on cash,

among other things redction o working capital and capital ependitre. The

Epress and Mail bsinesses will have the same ocs in this respect. Both

bsinesses ormed provisions to that e tent ltimo 2008 in line with the range

commnicated on 4 December 2008 dring TNT ’s annal analyst meeting.

For the medim term TNT will contine to ocs its eorts on accelerating the

top line growth by contining its investments in bilding (road-based) networks

in the emerging markets and looking or additional growth rom network

platorms inside an enlarged scope or its portolio. This additional growth

can either come rom adjacent bsiness models, re-bndling o eisting niche

bsinesses or the oering o new sector-specic network-based soltions.

Epress economic and bsiness

environment in 2008The rst hal o 2008 showed modest economic growth, combined with

a steep rise in commodity prices, particlarly el, with a price peak in Jly

2008. A sharp economic decline started mid-year and is still deepening and

broadening rther. The economic sitation was eceptionally ncertain with

increasing negative impact on prodction otpt, international trade, private

consmption and investments.

The transportation and epress indstr y was hit hard and impacted by changes

in global demand. Domestic and international order volmes started to drop,

rst in North America and later in Erope. In addition, the epress indstry in

emerging economies, which rely heavily on trade with matre economies like the

uS and Erope, was negatively impacted. A signicant and accelerating trend in

Erope is the shit in demand rom aster air based premim epress prodcts

to slower and less epensive road based and/or day-certain intercontinental

economy prodcts.

The volme development in TNT Epress refec ted these developments and

indicates three step-downs in the economic activity in the last si months o

2008 in Erope (see chart). In weeks 25 and 26, or the rst time a sharp decline

in volmes (in comparison with the previos year) in the air epress segment in

Erope was noticeable. In the month o September that decline accelerated to

a level o arond 10%. And in the last two trading months o 2008, the economy seemed to soten even rther, leading to a decline o air volmes o close to

20%. until the third qarter, the volmes in the international economy road

networks in Erope contined to grow, bt as o November also there the

growth trned sharply negative.



Annual report 2008

Strategic progress and business performance in 2

chapt

Express underlying volumes 2008 Kilos, year on year change, in %, excluding working days impact

-20

-10

0

10

Q1 Q4Q3Q2

Road

Air

The reslt o these severe economic and related market developments was a

signicant decrease in the operating prot o the Express bsiness compared to

2007 by more than 37% to a level o €376 million. Exclding restrctring and

reorganisation provisions and impairments related to restrctring at the end

o 2008 or an amont o €70 million, the nderlying operating prot amonts

to €446 million.

Mail economic and bsinessenvironment in 2008The mail markets are less cyclical and less vlnerable to recessions. The new

market orces o liberalisation and electronic commnication have more

infence on the addressed volme development o the Mail division than the

economic environment: mail volmes in its home market, the Netherlands, will

decline even in a growing economy. The development o addressed volmes

in the Netherlands in 2008 was in line with the trend o the past ew years,

with a decline o 3-4% per annm. The volme decline in 2008 was partially

compensated by Master Plan cost savings and a sharper market segmentation

leading to higher volme retention. On the other hand, as a reslt o its

expansion strategy into other ‘liberalised’ mail markets in Erope, TNT Mail can

grow rom a market share perspective. In the st arting period o this expansion,

market shares are rela tively low. Growth o this bsiness is thereore only slightly

infenced by economic cyclicality. Emerging Mail and Parcels in 2008 improved

compared to 2007 de to improved perormance and lower losses as a reslto the downsizing and transer o the oneros uK Parcel contract nderlying

related operations o TNT Mail’s division to Parcelnet Ltd. early 2008.

These developments had a signicant infence on the operating prot o the

Mail bsiness compared to 2007. Restr ctring and reorganisation provisions

and impairments related to the restrctring o the post oces in the

Netherlands had an impact o €89 million, bringing 2008 operating prot to a

level o €633 million. Th is compares to €626 million in 20 07, when €138 million

provisions and impairments were inclded.

Cost savings measresTo manage the conseqences o the crrent poor economic conditions

(in particlar or Express) and the impact o liberalisation and digitisation

(in particlar or Mail in the Netherlands), TNT annonced on 4 December

2008 to target strctral cost savings totalling €270-330 million in the period

2009-2010.

As part o this total, TNT Express targets total strctral savings o €170-210million to be realised in ll in 2010, o which €90-125 million are to be achieved

in 2009. In addition, TNT Express will be ready to implement rther volme

dependent contingencies p to an amont o €120 million savings in 2009.

Mail will contine the implementation o its crrent Master Plans and start a

new Master Plan. The ta rgeted savings are €60-70 million in 2009 pls a rther

€40-50 million in 2010. These savings cold be enhanced as a reslt o the ll

impact o a sccessl nalisation o the crrent collective labor agreement

negotiations that aim to establish more market conorm salary costs or its

operations. A new Master Plan III will be lanched or the period rom 2011

onwards, which aims at achieving an additional €200 million in recrring cost

savings based, among other things, on making fexible delivery models and

strctres and a higher level o part time labor.

TNT indicated a level o provisions or these cost optimisation initiatives in the

period 2008–2010 o €125–200 million (inclding post oces restrctring)

and possible impairments p to €150 million. The indicated range o provisions

excldes the possible impact o sccessl negotiations on a collective labor

agreement, which will reslt in earlier achievement o labor cost related savings.

At the end o 2008, a tota l o €115 million or provisions or these initiat ives and

€44 million o impairments were charged against the prot and loss accont.

Financial policy TNT targets maintaining its investment grade long term credit rating o “arond

BBB+”. Core to that target is TNT’s solid nancial position. In December 2008,

TNT redeemed a €650 million erobond, most o which was renanced

in Agst with a €592 million sterling-denominated 10-year erobond.

Additionally, also in the second hal o 2008, TNT placed €222 million o

commercial paper nder the Eropean commercial paper programme. De to

these eorts, TNT’s nancing position ltimo 2008 is solid. TNT has coveredback-stop acilities o p to €1 billion and the rst bond redemption is not ntil

2015. ultimo 2008 the net debt o the grop stood at €1,744 million and Free

Cash Flow over 2008 (see denition in chapter 2 – Financial strategy) was

parti clarly strong over 2008 at a level o €683 million.

The terms and conditions o TNT’s material long and short term debts as well

as its material (drawn or ndrawn) committed credi t acilities do not inclde any

nancial covenants.





chapter 3

€ 1,000m Syndicated back stop, of which €400m extended

€ 400m June 2015 eurobond

€ 650m November 2017 eurobond

£ 450m August 2018 eurobond (xed to €568m)

0

100

200

300

400

500

600

700

800

2018201720162015201420132012201120102009

Renancing range

Current debt prole

600

400 400

650

568

Working capital and real estateTNT will contine to improve working capital as a percentage o revene. The

prime areas o ocs are trade payables and trade receivables. The objective is

to ree p more than €200 million o working capital over the period 2009/2010.

As a percentage o revene, the trade working capital is to be improved to

arond 8%.

To ree p cash, TNT also intends to sell real estate in 2009/2010, which

has a book vale o arond €800 million and a market vale o at le ast €1.2

billion. The target proceeds are arond €200 million, assming close to normal

market vales.

PensionsDeclining eqity markets and lower risk ree interest rates had their impact on

the position o TNT’s main Dtch pension nd, which represents arond 94%

o TNT’s dened benet obligations. The coverage ratio o TNT’s largest Dtch

pension nd went rom arond 141% at 31 December 2007 to arond 93% at

31 December 2008, well below the 105% minimm nding reqirements as

prescribed by De Nederlandsche Bank (DNB). The negative retrn on assets o 14.2% and the increase o its liabilities by arond 30%, de to the decreased risk

ree rates in particlar, cased nding levels to decline.

As a reslt, TNT’s main pension nd was arond €500 million below the

minimm nding reqirements on 31 December 2008. The pension nd will

have to sbmit a recovery plan to DNB beore 1 April 2009. This recovery

plan needs to otline measres on how the pension nd will restore minimm

nding reqirements within the three-year time rame as crrently prescribed

by Dtch pension law. In addition, sch a plan will have to otline how the

coverage ratio will reach the reqired level o arond 120% within a timerame

o 15 years, sbject to the risks involved in the pension nd’s asset por tolio.

Sch a plan is the responsibility o the pension nd, which still has to decide

pon its corse o action. Since the employer’s position and the otcome o

crrent collective labor agreement negotiations are nknown as yet, the exact

nancial impact or TNT is still ncertain. However, the reqired additional

employer cash contribtion to the pension nd may have a material cash

impact on TNT. This is estimated at arond €140 million in 2009 in addition to

the sal annal employer contribtion o arond €100 million.

There is a signicant dierence in calclating the pension liabilities in accordance

with the reqirements o the DNB verss sch calclations nder IFRS.

Liabilities nder the DNB reqirements are calclated sing the swap crve as

pblished by DNB every month end, while nder IFRS liabilities are calclated

sing good qality corporate bond rates. Whilst dring 2008, and in par ticlar in the last months, t his swap crve has been going down, the corporate bond

rate has been going p. That aects the way in which TNT calclates pension

charges and the actarial gains and losses which throgh their impact on the

corridor infences the amortisation charges thereo.

Based on the IFRS convention, the charge to the income statement or dened

benet obligations in 2008 was €24 million in total, o which €14 million is

refected in the Mail reslts . The cash expense or dened bene t obligations

however was €233 million , compared to €212 million in 2007.

For 2009, the charge to the income statement or dened benet plans is

expected to be €64 million and the expected cash contribtions cold be

arond €365 million, o which arond €255 million relates to pensions and

arond €110 million to early retirement transitional plans and other post

employment dened benets.

DividendOver 2007, TNT paid ot 36.7% o normalised net income. TNT’s aim is to

increase this pay-ot to 40% by 2010, barring any noreseen circmstances.

The sharp declining bsiness environment in 2008, contining in 2009 in

a context o global economic and nancial crisis will impact all bsiness and

nancial decisions short term. This might also reslt in choices on dividend

pay-ot that are to be aligned with these circmstances.

2009For 2009, TNT ocses on maintaining and where possible strengthening its

investment grade nancial standing.

TNT will sharply ocs on cash and s trict bsiness perormance management

enabling to manage the balance as refected below eectively.



Annual report 2008


chapt

CstomersTNT strives to be a company that knows its cstomers extremely well, what

they vale, their needs and preerences, and aims to respond to them with

tailored prodcts and services. TNT believes that total cstomer ocs is a

sstainable competitive dierentiator.

TNT aims to exceed cstomer expectations by providing distinctive levels o

cstomer care at all contact points and bases its improvement programmes on

qantitative and qalitative cstomer eedback. This ensres that improvement

actions ocs on what is most important to cstomers rather than ocsing oninternal measres only. Cstomer needs and satisaction and loyalty levels are

thereore important markers that are identied throgh reglar contact and

strctred srveys. To measre the dierentiation elements TNT also exectes

benchmarking srveys, allowing it to dierentiate in the most impor tant drivers

o cstomer satisaction and loyalty. TNT encorages its people to go the extra

mile in their service to cstomers, nderstanding that engaged and motivated

employees will deliver an exceptional cstomer experience which in trn drives

prot.

TNT Express condcts an annal worldwide cstomer satisaction research,

in which cstomers have the possibility to complete the srvey in writing or

online. Last year, TNT received over 30,000 completed srveys o cstomers

across all cstomer segments. Recently, the Overall Cstomer Satisaction

measrement changed rom ‘meeting cstomer expectations’ to ‘exceeding

cstomer expectations’ aligned to the company mission statement. In 2008,

38% o TNT’s cstomers rated its service as exceeding expectations and in

aggregate a total o 92% considered the service as meeting expectations.

The srvey has been optimised ollowing in-depth statistical analysis and now

incldes attribtes that most matter and infence cstomer satisaction. The

main score is calclated by taking the percentage o cstomers that rated TNT

Express’ services higher and mch higher than expected. Analysis has shown

that cstomers that are very satised spend more and are also more loyal. The

contined aim is to increase the nmber o cstomers that rate TNT Express’

services as exceeding expectations, as ltimately this will positively impact

TNT’s bsiness.

TNT Post condcts a cstomer satisaction srvey among consmers and

small sized enterprises served by the call centre (telephone sales) twice a year.

An annal srvey is condcted among the medim sized and larger bsiness

cstomers. In addition, TNS NIPO (a leading Dtch provider o market

srveys) annally collects inormation rom 5,800 cstomers on ve cstomer

vales. The nal score is calclated by taking the weight cstomers give to these

cstomer vales and mltiplying this by the score or each vale. The srveyshave been optimised by measring perormance on all cstomer contact points

and are compared to competitor perormance. This enables direc t action and

the measring o its eects.

The graph below shows the nal score or small and medim enterprises. From

a management point o view this score is more relevant than the consmer

score, and in addition the other scores give essentially the same pictre.

TNT wants to exceed cstomer expec tations. Analysis has shown that satised

cstomers are more loyal and easier to retain. Thereore the aim o TNT Post

is to increase the percentage o very satised cstomers within the grop o

satised cstomers. The new measrement method can show the eects o

this eort.

The overall cstomer satisaction level was not impacted by the pblicity

arond closing post oces and the postal s trikes.

The ollowing two charts show the evoltion over the past ew years o

cstomer satisaction or Express and Mail respectively.

Cstomer satisaction Express stabilising at arond 92%.

85

87

89

91

93

95

Q2Q2Q4Q2Q4Q1Q4Q3Q1Q4Q3Q1Q4Q3Q1

Customer satisfaction Express

2008200720062005200420032002

Cstomer satisaction Mail increasing and stabilising at arond 89%.

Customer satisfaction Mail

85

87

89

91

93

95

Q2Q2Q4Q2Q4Q1Q4Q3Q1Q4Q3Q1Q4Q3Q1

2008200720062005200420032002





chapter 3

Hman resorces (HR)

“Instilling pride in or

people” a living reality TNT aims to make “instilling pride in or people” a living reality. This means

that every employee in its workorce perceives that he or she is recognised

as a valed individal and that TNT consistently spports development o their capabilities, skills and competencies to deliver perormance. TNT aims

to create a place where people are engaged, rewarded competitively, work in

a sae place, are treated eqally, can speak p reely and will be responsible and

accontable.

Labor orce2008 2007

Employees FTE’s Employees FTE’s

Express 75,537 70,667 75,032 70,271

Mail 86,052 42,431 84,929 42,777

Other network s 1,385 1,143 1,385 1,182

Non-allocated 271 252 236 229

TNT 163,245 114,493 161,582 114,459

The global HR approach aims to implement a ll scope ramework, respecting

the local sitation and challenges in implementation. Among other things it

strives to achieve and retain international standards on working conditions, with

respect or hman rights and work-related health and saety improvements.

Additionally, the global HR commnity ses the Investors in People (IiP)

standard to enorce the company vales, and achieve a strctred people

management and development approach. Frther, to attract and retain the

right people or the job, TNT has agreed on global compensation and benets

practices. As TNT believes in measring and employee dialoge to improve its

HR strategy, additional actions are based on the indicators reslting rom the

TNT global engagement srvey.

The Investors in People

standard in TNTThe IiP standard is a bsiness improvement tool, designed to advance anorganisation’s perormance throgh eective management and development

o its people. It provides TNT with a niqe link between individal and

organisational growth, aligning the organisation needs with individal learning

and development practices. Implementation takes place at local level serving

local needs. Nevertheless, special attention is pt on commnication o the

TNT strategy, providing eqal learning and development opportnities or all

employees, development o leadership and on perormance management.

Learning and developmentTNT oers training acilities or all employees at each level. Where necessary,

sta may attend spplementary training or receive individal coaching, allowing

them to expand their proessional horizons. In 2008, approximately 20 work

hors per FTE were spent on training and development. Each year, progress

evalations are held with employees with a ocs on their perormance,

behavior and personal development. As TNT strives or the personal

development o employees internal promotion is essential. There are explicit

gidelines in place regarding local recritment policy. With some 2,200

locations arond the world, gidelines may be complemented where reqired

by local reglations and practices.

Equal opportunities and diversityIt is important to TNT to create eqal opportnities or all employees, withot

discrimination on the gronds o age, disability, ethnicity, gender, marital stats,

race, religion, or sexal orientation. TNT aims that each and everyone is able to

develop hersel/himsel to ll potential.

Gender prole

in percentage o headcont 2008 2007

Male Female Male Female

Mail 59% 41% 59% 41%

Express

(exclding major acqisitions) 67% 33% 68% 32%

Other networks + GHO 64% 36% 65% 35%

TNT Total

(excluding major acquisitions) 63% 37% 63% 37%

TNT Total

(including major acquisitions) 66% 34% - -

See the CR Report 2008 or more details.

Internal promotionin percentage o management vacancies lled rom within in headcont

2008 2007

Mail 64% 54%

Express

(exclding major acqisitions) 64% 60%

Other networks + GHO 32% 32%

TNT Total

(excluding major acquisitions) 64% 59%

TNT Total

(including major acquisitions) 75% -


To create more awareness on eqality and diversity within TNT, there are

several networks sch as TNT Link, a women’s network, TNT unity, a network

with 1,250 members that spports mlticltral employees, and TNT GLBT

network, a gay, lesbian, bisexal, and trans-gender network, which has 475

members. These networks ser ve TNT’s internal emancipation goals.

LeadershipTNT leadership mst be reslt driven, creating an environment in which

employees are enabled, motivated, challenged and developed to perorm to

their ll capabilities. Finding and developing leadership potential is thereore a

key bilding block or TNT’s tre sccess.



Annual report 2008


chapt

For 2008, varios achievements can be reported in this area. A shared method

o identiying and developing talent was implemented and is spported by a new

management and development inormation system. The resorce committees

have been strengthened throghot the company, ensring sccession planning

is connected with the bsiness. Strengthening leadership skills is a ocs in

the varios tailor-made leadership trainings within TNT, sch as the Talent

Leadership Programme or the most senior levels, Gateway to Leadership

and the Mastering Yor Leadership Programme. Many TNT managers have

ollowed the programmes sccesslly.

Performance management Within TNT each and ever y employee shold work towards clear measrable

goals. To commnicate targets and other ocs areas an Annal Senior

Management Meeting is organised ollowed by varios cascades in the company,

team meetings and individal meetings. In this way each individal knows TNT’s

strategy and its own expected individal contribtion to it. In many nctions

annal goal setting is established and realisation measred and discssed.

Global compensation and

benet practicesCompleting the above mentioned global HR initiatives, TNT has global

compensation and benet practices. Good progress was made in the redesign

and implementation o benchmarked compensation and benets policies,

ensring that TNT’s exective poplation is rewarded accordingly. Additionally,

de to TNT’s global pension and benets inventory, TNT has insight in its

benets landscape. The global inventory measred TNT’s compliance and

market conormity o local policies on disability, decease, retirement and health.

The otcome conrmed TNT’s general market conormity and compliance and

enabled actions where needed.

Employee engagementGiven TNT’s line o bsiness, employee motivation and engagement have

always been important. TNT recognises that it is important to have indicators

available that enable management to prse the best possible engagement.

The global engagement srvey is TNT’s tool to measre TNT’s sccess

in increasing employment pride and motivation. TNT started to measre

engagement at a global level in 2006 and established a sccessl methodology

and approach over the years. To acilitate as many participants as possible, the

srvey is translated into 37 langages and available digitall y and in paper version .In October 2008, all TNT employees were invited to participate in the global

engagement srvey with the exception o the employees working or Hoa

Grop o China (Hoa). The reslt s are available on depar tmental levels (nless

smaller than ten persons), giving managers and their teams scient inpt to

action on it.

The reslts in 2008 show that TNT’s engagement scores are higher than the

indstry benchmark. The most important ndings inclde:

engagement in TNT has improved by 3% points over the last two years, –

overall response rates have increased, and –

specically high scores on working relationships when compared to the –

Global Logistics Companies norm.

TNT’s engagement improved

0

10

20

30

40

50

60

70

80

90

100

TNTGHOMail 1Express

2006 2007 2008 2006 2007 2008 2006 2007 2008 2006 2007 2008

1– includes Mail Netherlands and European Mail Networks

Engagementin percentages

Engaged employees and emphas is on health and saety have a positive infence

on absenteeism.

Absenteeism2008 2007

Mail 5.0% 5.3%

Express

(exclding major acqisitions) 3.4% 4.1%

Other networks + GHO 6.2% 6.2%

TNT Total

(excluding major acquisitions) 4.2% 4.6%

TNT Total

(including major acquisitions) 3.9% -


Indstrial and labor relationsTNT believes in employee dialoge. Trade nions and works concils thereore

contine to be valable partners. Main principles in all o TNT’s relations with

the trade nions and works concils are an open and transparent relationship

and the timely sharing o as mch inormation as possible. TNT vales its good

relationship with the trade nions and works concils, as it reslts in decisions

that take accont o all interests concerned.

In 2008, the contract with the Eropean works concil was revisited and

agreed, ensring a clear rote and sense o prpose in the cooperation. The

constrctive consltations with many other works concils and employee

representations were contined.





chapter 3

Wages and general working conditions, amongst others in the Netherlands, are

the sbject o centrally negotiated collective labor agreements. In 2008, special

attention was needed or the collective labor agreement in the Netherlands,

mainly de to the act that r ther savings were necessary. Discssions were

extensive and led to some strikes, the rst since 1984. TNT extended the

existing collective labor agreement or another year with the prereqisite

that the level o a new operations collective labor agreement wold be

sbstantially lower than o the crrent collective labor agreement or TNT.

The negotiations started in December 2008. Varios other labor agreements

were renewed in 2008.

BrandTNT’s corporate cltre has been characterised by a strong, robst ‘can-do’

attitde and spirit or a long time. It is the attitde that TNT’s employees bring

to solving problems, carrying ot their daily tasks and responding to TNT’s

stakeholders and the world ot side o TNT.

TNT, however, never sed this ‘can-do’ spirit to dierentiate its brand and

expose its tre character in the many markets served by Mail and Express.

That started to change in 2008. By introdcing rst internally and gradally

externally the new s trap line ‘sre we can’, TNT aims to make ‘can-do’ central to

its positioning in a way that is trly meaningl and dierent. TNT believes ‘sre

we can’ is meaningl and relevant to all i ts stakeholders, being it s employees,

cstomers or even global society (see chart). The exceptional things TNT

does in its Express Special Ser vices and initiatives like Planet Me and Driving

Clean already demonstrate TNT’s ‘can-do’ mentality. TNT realises ‘sre we

can’ is a bold claim abot its collective attitde; it comes to lie throgh the

everyday proessional behavior o TNT’s employees. That is why the star t o

this new brand positioning is star ted with an internal ocs. Simltaneosly, all

existing divisional or service specic strap lines and the category dener ‘Global

Express, Logistics & Mail’ are being phased-ot.

Society Support counterweight to thedoom and gloom that sometimessurrounds climate change

EmployeesEncouraging andsupporting people

to develop

CustomersNatural response to acustomer request: ‘Can youdeliver pandas to Spain?’

TNT’s new strap line

‘Sre we c an’ provides the consistent brand positioning or all activities and all

geographical markets where TNT operates. In 2009, new marketing initiatives

will be developed that spport the implementation o the new strap line and

rther increase brand vale.

Corporate responsibility This section smmarises the key elements o TNT corporate responsibility

dring 2008 and the plans or 2009. Readers are directed to TNT’s 2008

corporate responsibility report which is available at grop.tnt.com or detailed

disclosre and overview o CR perormance and objectives.

TNT reviewed and pdated its strategy or social and environmental objectives

dring 2008. The rst reslt was the adoption o a new term: ”corporate

responsibility”. For TNT this combines sstainability, which ocses on the

environment, and corporate responsibility, which deals with people and society

as a whole.

TNT pblished its rst CR report, which was then called social responsibility report, in 2004. Since then mch has been accomplished. Management has been

implementing processes, systems and s tandards across all bsiness operations,

and has contined eorts to integrate these s tandards into the spply chain and

to benchmark corporate responsibility practices.

TNT sbscribes to internationally recognised initiatives and standards sch as

the united Nations Global Compact, which embraces, spports and enacts

a range o vales in the areas o hman rights, labor standards and the

environment. In 2006, TNT revamped and re-lanched the comprehensive

TNT Bsiness Principles, which nderpin TNT’s commitment to integrity, legal

compliance, contined improvement and sstainability (see grop.tnt.com). In

addition , TNT’s policy over the past or years has been to lay a solid ondation

across both social and environmental agendas to ensre all lly-owned TNT



Annual report 2008


chapt

operations comply with ve certied management systems as appropriate to

each company component:

OHSAS 18001 (occpational heal th and saety), –

Investors in People (personal growth o employees), –

SA 8000 (social responsibility in non-OECD contries), –

ISO 9001 (qality management leading to operational excellence), and –

ISO 14001 (environmental management). –

Implementing these standards and management systems acilitates TNT tocontinosly improve its perormance in these critical areas in a strctred and

transparent manner. They also provide management with reliable and qality

data on which to jdge per ormance against key perormance indicators as well

as an evalation o benchmarking processes.

The table below discloses TNT’s perormance in the implementation and

achievement o certication o these standards. Note that the data below

excldes the major acqisitions in Brazil, China and India. TNT Mercúrio (Br azil)

and Speedage Express Cargo Services (India) have plans in place to achieve

certication to all standards by 2011. For Hoa (China) a phased plan has been

agreed that ocses rst on achieving OHSAS 18001 and ISO 9001 cert ication

by 2012 and sbseqent ly on achieving the other standa rds by 2015.

Certicates (% based on FTEs)2008 2007 2006

OHSAS 18001 89% 86% 82%Investors in People (based onheadcont) 85% 82% 79%

SA 8000 (in non-OECD contries) 94% 95% 48%

ISO 9001 90% 90% 80%

ISO 14001 89% 86% 65%

See the CR Report 2008 or more details

docment all employees’ health and saety roles and responsibilities, –

identiy and docment elements o existing and proposed work activities –

that present a signicant health and saety risk,

identiy, evalate and control health and saety risks arising rom rotine and –

non-rotine activities and workplace acilities,

otline how health and saety objectives and management programmes are –

to be set and monitored to improve perormance,

otline the docments, procedres and instrctions reqired to implement –

and maintain the health and saety management system,

otline the training and competence reqired to control signicant health – and saety risks, and

acilitate planning, control, monitoring, corrective action, aditing and r eview –

to ensre compliance with TNT’s health and saety policies.

TNT regretlly reports a total o 19 atal accidents in 2008 (exclding

sbcontracted activities), o which or were workplace atal accidents and 15

were atal road trac accidents (12 o which were also blameworthy). The 19

atal accidents reslted in ve TNT employees being killed, one sbcontractor

death and 13 third party atalities.

An additional 30 road trac atal accidents occrred as a reslt o TNT’s

sbcontracted operations dring 2008. These additional accidents reslted in

10 sbcontractor atalities and 29 third part y atalities. TNT ac tively encorages

and spports its sbcontractors to meet high road saety standards and to

report accidents and atalities to TNT i they occr.

The increase in atal workplace and road trac atal accidents is mainly related

to the growth o the bsiness in the emerging markets o India, China and

Brazil. Improved internal reporting systems have been pt in place to captre

reliable data on workplace and blameworthy and non-blameworthy road

trac accidents. These systems now provide TNT management with timely

and detailed reports on the root case o the accident and management is

mandated to speciy corrective actions and to execte sch actions with the

greatest expedience.

The majority o the atal accidents are cased by road trac collisions, refecting

that global road trac injries and deaths are increasing rapidly, particlarly in

developing and low-income and middle-income contries. The World Health

Organisation’s “World report on road trac injry prevention” estimates

that the total nmber o road trac atalities worldwide will rise by some 65%

between 2000 and 2020.

EnvironmentTNT actively seeks to limit the environmental impact o its bsiness activities.

In particlar, CO2 emissions, generated by or related to TNT’s operational

activities, are a key area o ocs. Besides its own CO 2 ootprint, TNT

acknowledges co-responsibility or the emissions reslting rom transport

activities that are contracted ot and reports on the sbcontracted CO 2

emission in addition to its own ootprint. The CO 2 ootprint is completed by

inclding the CO2 emissions rom bsiness travel by air and company cars.

The overall CO2 emissions or TNT’s own operations have increased slightly,

which can be attribted mainly to increased el consmption in aviation.

The CO2 eciency or bildings improved by 20% compared to 2007. The

sstainable electricity contract in t he Netherlands contribted signicantly to

redcing the CO2 emissions associated with bildings.

Employee health and saety TNT believes that an embedded and robst saety cltre, top-down and

bottom-p, mst be at the core o operations and management practices.

Health and saety risks cannot be treated in isolation rom other company

processes and thereore mst be seen as an integral par t o activities. As sch,

managing health and saety is a primar y responsibility o all TNT managers; rom

the most senior exectives to rst-line spervisors throghot the company.

Specic responsibilities or health and saety are delegated companywide and

these dties are recorded ormally in job descriptions. It is TNT’s policy to

ensre that all operations meet the reqirements o TNT ’s health and saety

programme, which is based on the internationally recognised OHSAS 18001

standard.

TNT’s global health and saety programme in both the Mail and Express

divisions is designed to:

provide a system to eliminate or minimise risks to employees and others –

who may be exposed to health and saety risks associated with company

activities,

identiy the relevant legal reqirements appropriate to company activities, –

ensre any other reqirements to which the location sbscribes are taken –

into accont, inclding best practices and any local operational restrictions,





chapter 3

This is illstrated in the table below:

Environment2008 2007

CO2

emissions

CO2

emission absolte (ktonnes) 1,021.9 1,013.0

CO2

eciency small trcks (g CO2

/ km) 281 287

CO2

eciency large trcks (g CO2

/ km) 670 676

CO2

eciency aviation (g CO2

/ tonne*km) 1,107 1,132

CO2

eciency bildings (kg CO2

/ m2) 38.6 48.3

Sustainable electricity

Sstainable electricity (% o total electricity) 43.5 11.0


Setting and implementing CO2 targets have a key role in managing CO2

operational eciency systematically. Sstained management o CO2 eciency

will only be easible by embedding CO2 targets in management strctres at all

levels and by creating the reqired accontability strctres. In the short term,

TNT aces several challenges in setting ambitios and realistic CO 2 targets

namely:

important technological options that exist to redce emissions drastically –

are not yet available in the transport sector,

options or aviation emissions, which comprise a considerable part o TNT’s –

CO2 ootprint, are relative limited in the medim term, and

a signicant part o TNT’s bsiness is contracted ot to road and air –

sbcontractors, and they contribte signicantly to TNT’s CO2 ootprint.

TNT’s ability to directly infence the CO2 perormance o sbcontractors

is relatively limited.

Dring 2008, TNT has developed an improved CO2 metric to allow

management to set a reliable baseline position on which initial preliminary

targets can be set. It is planned that this preliminary position will be rened and

solidied dring 2009 and action plans will be set. Please reer to TNT’s 2008

corporate responsibility report or more inormation on these indicators, the

preliminary baseline and planned actions.

Volntary contribtions to society TNT has bilt a reptation o CR leadership throgh special initiatives, sch

as its innovative corporate partnership with the united Nations World Food

Programme (WFP). Since 2002 TNT has been bringing its people, capabilitiesand skills into action to help WFP in its ght against world hnger. This

partnership has been very sccessl, with benets or WFP and TNT. Total

vale o in-kind and cash contribtion (€6 million) and employee ndraising in

2008 (€2 million) was €8 million. In addition, 66% o TNT’s employees indica ted

in the 2008 annal employee engagement srvey that they considered TNT a

more attractive employer as a reslt o the par tnership with WFP.

An opportnity TNT has identied within the WFP partner ship is the prodction

o cash crops or bio-energy prposes – in particlar to cltivate Jatropha trees

in a sstainable way with smallholder armers in Malawi. The Jatropha project is

based on a social ventre capital model, which brings signicant social benets

or the armer commnities in Malawi as well as environmental benets. TNT

has established a social ventre with a local Malawian company, Bio Energy

Resorces Limited (BERL). This project was treated as a normal bsiness case;

as sch it has been sbject to extensive de diligence, both internal and external.

TNT gets a air retrn as a social investor. In addition, over time this investment

cold contribte to o setting TNT’s CO2 emissions partially.

In 2009, BERL plans to plant 24 million Jatropha trees in Malawi. Over the next

six years, BERL plans to plant p to 250 million trees in total. A warehose has

been bilt, inclding two expelling machines, or storing the harvested nts.

These machines are sed to crsh the nts. A small rener y nit has also been

installed. These assets provide the operational proo o concept needed in

2009. As o 2009, the harvest will be reprchased and collected rom the many smallholder armers that participate in the programme.

In addition, TNT has also co-onded the North Star Fondation (NSF). This

was lanched in 2006 and is a pblic-private partnership that is establishing a

network o roadside health clinics at major trck stops and border crossings

along the major arterial transportation rotes in sb-Saharan Arica, India and

Asia. The health clinics oer a practical, low-barrier and low-cost response

to the transmission o HIV and other sexally-transmitted inections in the

transport sec tor.

Corporate responsibility

– 2009 and beyond Whilst TNT’s CR perormance has been recognised as innovative and

achieved desired otcomes, it is clear rom the intensive examination made

dring 2008 that there are points or continos improvement, especially in

aligning the priorities in TNT’s CR strategy with the areas where TNT makes

the biggest impact: employees and the environment. Developing a ramework

that establishes the CR s tandards or sbcontractors and other stakeholders

and realigning volntary and philanthropic contribtions behind overall CR

objectives are two other priorities.

Internally, corporate responsibility will be integrated rther into bsiness

practice, and management will be even more involved in CR development

to take TNT’s employees on the jorney towards continosly improving

corporate responsibility. TNT will also take into accont the varying levels o

matrity o its operations and i necessary dierentiate exection.

TNT believes in the necessity o being transparent abot the challenges

involved in developing a sstainable CR strategy. It is also convinced that this

strategy realignment is credible, responsible and, above all, achievable. Sccess

in delivering on these ambitions will create vale or TNT’s people, its bsiness,and or society and the world in which it opera tes. It will position TNT rmly to

carry orward the CR leadership role it has already created.

Integrity In Janary 2006, TNT’s Board o Management lanched the TNT Integrity

Programme and senior management took on the responsibility or the roll-ot

o the Programme.

TNT’s Integrity Programme consists o or parts: gidance, awareness and

compliance, embedding, and monitoring.

Gidance is set ot in the TNT Bsiness Principles which have been ormally

adopted and approved by the Board o Management and Sper visory Board.



Annual report 2008


chapt

The TNT Bsiness Principles, together with other integrity-related grop

policies and procedres, are pblished on TNT’s corporate website. These

grop policies deal with topics sch as compliance with laws and reglations,

accrate and timely disclosre o inormation, transparency, eqal opportnities,

air treatment, confict o interest, corrption, air competition, and corporate

responsibility. The TNT Bsiness Principles are aligned with the uN Global

Compact (since 2002) and the Partnering Against Corrption Initiative

principles (since 2008). TNT’s integrity-related grop policies and procedres

inclde the TNT Grop Procedre on Whistleblowing, the TNT Grop Policy

on Frad Prevention, the TNT Grop Policy on Gits and Enter tainment and the TNT Grop Policy on Disciplinary Actions. The latter policy makes clear

that non-compliance with TNT ’s grop policies will not be tolerated.

Awareness and compliance are enhanced by commnication and web-based

and ace-to-ace training. Interactive integrity workshops have been and

contine to be held or senior and higher management in all parts o the world.

Senior managers, on the basis o the “train the trainer” principle, thereater

cascade this training and commnication down into t heir organisations, ths

llling their responsibility or the roll-ot o the Integrity Programme.

The TNT Bsiness Principles and related grop policies are being embedded

in TNT’s strategic and operational decision processes. The TNT Integrity

Programme is monitored in several ways. See or more deta ils chapter 7.

In 2007 and 2008, TNT was honored as the leader in the sper sector IndstrialGoods and Services o the Dow Jones Sstainability Index. In both years TNT

scored 100% in the area o codes o condct and compliance. TNT is prod o

this recognition, bt at the same time will contine to seek improvement and

the rther roll-ot o its Integrity Programme in order to rther enhance its

strong ethical cltre.



25


chapter 3

Consolidated grop resltsYear ended at 31 December

2008 variance % 2007

Total operating revenes 11,152 1.2 11,017

Other income 35 (53.3) 75

Operating expenses exclding depreciation, amortisation and impairments (9,806) (2.7) (9,551)

EBITDA 1,381 (10.4) 1,541

Depreciation, amortisation and impairments (399) (14.3) (349)

Total operating income 982 (17.6) 1,192

as % o total operating revenes 8.8 11

Net nancial expense (147) (56.4) (94)

Income taxes (242) 23.4 (316)

Reslts rom investments in associates (33) 1

Proft or the period rom continuing operations 560 (28.5) 783

Prot rom discontined operations 0 206

Proft or the period 560 (43.4) 989

Attribtable to:

Minority interests 4 33.3 3

Equity holders o the parent 556 (43.6) 986

Earnings per ordinary share ( in cents)1 152.9 (40.6) 257.4

Earnings per dilted ordinary share (in cents)2 152.5 (40.5) 256.1

(in millions, except percentages and per share dat a)1 – In 2008 based on an average o 363,566,403 o otstanding ordinary shares (2007: 383,028,938). See note 31 to the consolidated nancial statements.

2 – In 2008 based on a n average o 364,704,745 o otstanding ordinary shares ( 2007: 385,071,986). See note 31 to the consolidated nancial statements.

Revenes and earnings gropIn this chapter the positive or negative sign o the variance as shown in the tables

is determined by the impact o the variance on the reslt.

Grop consolidated reslts

In 2008, TNT had total operating revenes o €11,152 million (2007: 11,017).

TNT’s Express division acconted or 59.7% (2007: 59.5%) o TNT’s grop

operating revenes and 38.3% (2007: 50.3%) o TNT’s grop operating income.

TNT’s Mail divi sion acconted or 38.1% (2007: 38.4%) o TNT’s grop operating

revenes and 64.5% (2007: 52.5%) o TNT’s grop operating income.

Total operating revenes increased by 1.2% in 2008 compared to 2007.Operating income decreased by 17.6%, on balance mainly cased by the

economic downtrn leading to redced volmes within Express, reslting in

lower operating reslts predominantly in the International and Domestic

bsiness clster. The signicant change o oreign exchange rates against the

ero compared to 2007 (mainly the British pond and the uS dollar) had a

negative impact on grop operating revene o €308 million.

Key actorsKey actors that aect TNT nancial reslts inclde:

the nmber o shipments transported throgh TNT’s networks, –

the volmes o mail TNT delivers, –

the mix o services TNT provides to its cstomers, –

the prices TNT obtains or its services, –

crrency development, mainly the exchange rate o the British pond and –

uS dollar against the ero,

the average nmber o working and delivery days in a year, –

the speed o TNT’s network expansion, –

TNT’s ability to manage TNT’s capital expenditres, –

operating expenses, provisions and impairments, –

TNT’s ability to adapt it s operating expenses to shiting volme levels, – implementation o cost savings programmes, and –

TNT’s ability to integrate acqisitions. –

TNT’s Express and Mail bsinesses provide services to cstomers and accont

or revenes or those services on a daily basis. Reslts o operations are

thereore infenced by the average nmber o working and delivery days in

a year.

TNT ses total revenes, i.e. net sales pls other operating revenes, to assess

the perormance o its bsiness. TNT believes that other operating revenes,

which consist primarily o rental income rom temporarily leased-ot property

and passenger/charter revenes, are a recrring element and TNT allocates

them to its bsinesses when reviewing their perormance.

Annual report 2008



Annual report 2008


chapt

Operating revenes by segmentYear ended at 31 December


Express 6,653 1.6 6,551

Mail 4,245 0.3 4,234

Other networks 273 6.6 256

Non-allocated and inter-company (19) 20.8 (24)

Total operating revenues 11,152 1.2 11,017

(in millions, except percentages)

TNT attribtes revenes and expenses to its bsinesses based on the

nderlying natre o the transaction that gave rise to the revene or expense

and the bsiness involved. TNT calls revenes and expenses that it does not

allocate to divisions: “non-allocated”. These revenes or expenses occr at

Other income by segmentYear ended at 31 December


Express 7 (22.2) 9

Mail 26 (59.4) 64


Non-allocated 0 0.0 0

Total other income 35 (53.3) 75


Grop operating revenesTotal operating revenes increa sed by €135 million (1.2%) to €11,152 million in

2008 compared to 2007. TNT’s Express bsiness contribted an increase o

€102 million. Othe r networks contr ibted an increa se o €17 million and TNT’s

Mail bsiness contr ibted an increa se o €11 million to this growth.

Organic growth, dened as the growth calclated against 2007 oreign exchange

rates and exclding the eect rom the rst time consolidation o acqisitions

and the deconsolidation o disposals, was responsible or 4.1% o total grop

operating revenes growth. The consolidation eect rom acqisitions and

the deconsolidation eect rom disposals acconted or a decrease o 0.1%.

unavorable changes in oreign exchange rates negatively impacted the

revene growth by 2.8%.

Operating income by segmentYear ended at 31 December


Express 376 (37.2) 599

Mail 633 1.1 626


Non-allocated (38) 13.6 (44)

Total operating income 982 (17.6) 1,192


TNT’s Express bsiness achieved 1.6% higher operating revenes compared to 2007, o which 5.1% organically. The overall increase in operating revenes

was achieved mainly rom good growth in emerging markets which were not

yet strongly impacted by the global economic downtrn and rom solid overall

growth in the rst six months o 2008. TNT’s Express bsiness is rther

described in chapter 4.

In TNT’s Mail bsiness, operating revenes increased by 0.3% in 2008, o which

2.5% organically. The volmes contined to decline in the Netherlands de to

volme decline in addressed mail items. The volme decline impact on revene

in Mail Netherlands was accompanied by a negative price-mix eect. Emerging

Mail and Parcels operating revenes increased by 8. 5%. TNT’s Mail bsiness is

rther described in chapter 5.

grop level, and TNT does not consider them part o the bsinesses operations.

This method o allocating revenes and expenses is consistent with how TNT

internally manages its bsinesses.





chapter 3

Grop operating expenses

Operating expensesYear ended at 31 December


Cost o materials 484 (14.4) 423

Work contracted ot and other external expenses 4,978 (3.6) 4,806

Salaries and social secrity contribtions 3,617 (0.2) 3,608

Depreciation, amortisation and impairments 399 (14.3) 349Other operating expenses 727 (1.8) 714

Total operating expenses 10,205 (3.1) 9,900


Total operating expenses increased by €305 million (3.1%) to €10,205 million

in 2008 compared to 2007. Overall, the organic growth in operating expenses

was 6.6%. Inclded in the total operating expenses is an impairment charge

relating to the decommissioning o nine aircrat amonting to €37 million and

restr ctr ing costs o €33 million mainly to cover or 1,000 redndancies within

Express and €82 million restrctring costs and €7 million impairment o assets

within Mail relating to Postkantoren B.V. Changes in oreign exchange rates

positively impacted the operating expenses by 2.9%.

Total cost o materials increased by €61 million (14.4%) in 2008 compared to

2007. Organically, cost o materials increased by €89 million (21.1%) in 2008,

mainly de to higher el costs in TNT’s Express division.

Work contracted ot and other external expenses relate to ees paid

or sbcontractors, external temporary sta, rent and leases. Total work

contracted ot and other external expenses increased by €172 million (3.6%)

in 2008 compared to 2007 partly de to higher el costs or sbcontractors.

Salaries, pensions and social secrity contribtions increased by €9 million to

€3,617 million (0.2%) in 2008 compared to 2007. Salaries, pensions and social

secrity contribtions increased organically by €111 million (3.0%) which was

almost completely oset by an adverse eect o oreign crrencies o €99

million (2.7%). The organic increase in salary costs was de to a new collective

labor agreement in Mail Netherlands and organic growth in Emerging Mail and

Parcels which were partly oset by a redction o arond 1,400 FTE’s in Mail

Netherlands in connection with the cost fexibility programme and by lower

pension cost s than in 2007.

Depreciation, amortisation and impairments increased by €50 million

(14.3%) compared to 2007 mainly de to an impairment charge relating to

the decommissioning o nine aircrat amonting to €37 million and €7 million

impairment relating to Postkantoren B.V.

Other operating expenses inclde items sch as marketing expenses, other

restrctring costs, insrance costs and varios other operating costs. Other

operating expenses increased by €13 million (1.8%) in 2008 compared to 2007.

Other operating expenses increased organically by €71 million (9.9%) in 2008,

mainly de to higher bad debt provisions and vehicle expenses within Express.

Other operating expenses decreased by €52 million de to disposals in 2007

and 2008, particlary de to the €23 million costs o the oneros uK Parcels

contract in 2007. Changes in oreign exchange rates cased a decrease o €6

million.

Grop operating incomeTotal operating income or the grop was €982 million in 2008, a decrease o

17.6% compared to 2007. Express operating income decreased by 37.2%, or

25.5% exclding the €70 million eect o restrc tring costs and impairment o

aircrat. The decrease was primarily de to the economic downtrn reslting

in signicantly redced volmes in the international premim prodct within

Express in the International and Domestic bsiness clster. Operating income

o TNT’s Mail bsiness increased by 1.1%. This increase was mainly de to lower

restrctring costs.

Other networks and Non-allocatedOperating revenes in TNT’s bsiness entity Other networks increased by

6.6% compared to 2007 and amonted to €273 million. Operating income

remained stable with €11 million (2007: 11), bt nderlying perormance

improved becase 2007 inclded varios one o items.

In 2008, non-allocated operating costs amonted to €38 million (2007: 44).

Inclded in these cost s is €14 million (2007: 13) or new bsiness init iatives, wh ich

mainly relate to investigations to optimise TNT’s network strategy introdced

in 2005 and costs relating to an initiative to rther drive vale “below the

line”. Cost made to spport the World Food Programme (WFP) and Planet

Me amonted to €9 million (2007: 10). Inclded in the cost or WFP are costs

or knowledge transer, hands on spport, raising awareness and nds or the

World Food Programme inclding cash donations. Planet Me is a TNT initiative

to have an active contribtion to redce CO2 emission to avoid rther global

warming. The other cos t were €15 million (2007: 21).



Annual report 2008


chapt

Grop nancial income and expenses

Net nancial (expense)/incomeYear ended at 31 December


Interest and similar income 70 (27.8) 97

Interest and similar expenses (217) (13.6) (191)

Net fnancial expense (147) (56.4) (94)


Interest and similar income o €70 million (2007: 97) mainly relates to interest

income on banks, loans and deposits o €44 million (2007: 69), o which €30

million (2007: 58) relates to a gross-p o interest on cash pools (lly oset by

an eqal amont in interest expenses) and interest income o €17 million (2007:

8) relating to otstanding hedges or air vale adjstments.

Interest and similar expense o €217 million (2007: 191) mainly relates to

interest expenses on short term debt o €46 million (2007: 79), o which €30

million (2007: 58) relates to a gross-p o interest on cash pools (lly oset by

an eqal amont in interest income), interest expense on long term debt o

€124 million (2007: 75) and interest expense o €35 million (2007: 18) relating

to otstanding hedges or air vale adjstments.

The interest income and expense on cash pools are reported on a gross

basis according to IFRS. From an economic and legal perspective this €30

million (2007: 58) interest income lly nets o against the same amont

o interest expense. The amonts are not netted in the income statement

becase nder IFRS sch oset needs in practice to be irreversibly exercised

rom time to time.

The interest and similar income and expense on varios oreign exchange

derivatives have been aggregated on a gross basis while economically the €17

million o interest income (2007: 5) is lly set o against the €35 million (2007:

18) o interest expenses on hedges.

In light o the crrent credit crisis, TNT has conservatively overnded itsel

with commercial paper to assre liqidity and sbseqently earned €1 million

o interest on short term deposits which were at the same time oset by

commercial paper with an interest cost o €1 million.

Reslt rom associatesInclded in resl t rom associates is an amont o €30 million or the impairment s

o nderlying investments o Logispring triggered by the deteriorated economic

environment or sch activities.

Grop income taxes

Income taxesYear ended at 31 December


Crrent tax expense 203 (24.5) 269

Changes in deerred taxes 39 (17,0) 47

Total income taxes 242 (23,4) 316


Grop income taxes amonted to €242 million (2007: 316), a decrease o 23.4%

compared to 2007.

Income taxes dier rom the amont calclated by mltiplying the Dtch

stattory corporate income tax rate with the income beore income taxes. In

2008, the eective income tax rate was 30.2% (2007: 28.8%), which is higher

than the stattory corporate income tax rate o 25.5% in the Netherlands

(2007: 25.5%). This dierence is cased by several opposite eects . For rther

details see note 22 o the consolidated nancial st atements o TNT N.V.

Grop net incomeIn 2008, prot or the period attribt able to the eqity holders o the parent

was €556 million, a decrease o €430 million (43.6%) compared to 2007. This

decrease was on balance mainly the reslt o lower operational earnings within

the Express division and the gain rom discontined operations o €206 million

inclded in 2007 net income.





chapter 3

Net assets and nancial position grop

Overview


Balance sheetsNon-crrent assets 4,730 (1.9) 4,823

Crrent assets 2,430 7.9 2,252

Assets held or sale 25 150.0 10Total assets 7,185 1.4 7,085

Eqity 1,757 (9.9) 1,951

Non-crrent liabilities 2,756 23.5 2,232

Crrent liabilities 2,672 (7.9) 2,902

Liabilities related to assets classied as held or sale 0 0.0 0

Total liabilities and equity 7,185 1.4 7,085

Net retrn on eqity 1 (%) 31.6 50.5

Eqity as % o total liabilities and eqity 24.5 27.5

Cash fow statementsNet cash rom operating activities 923 43.5 643

Net cash sed in investing activities (257) (3,112.5) (8)

Net cash sed in nancing activities (458) 27.9 (635)

Changes in cash and cash equivalents rom continuing operations 208 0

Net cash rom operating activities 0 (19)

Net cash sed in investing activities 0 4

Net cash sed in nancing activities 0 16

Changes in cash and cash equivalents rom discontinued operations 0 0.0 1

(in millions, except percentages)1 – The prot attribtable to the shareholders as a percentage o total eqity.

O-balance sheet itemsTNT has no o-balance arrangements other than those disclosed in note 28 o

the consolidated nancial statements o TNT N.V. Cash and cash eqivalents

(exclding discontined operations) totalled €497 million at 31 December

2008 (2007: 295).

Cash fow data

Liquidity and capital resourcesTNT’s capital resorces inclde nds provided by TNT’s operating activities

and capital raised in the nancial markets.

The ollowing table provides a smmary o cash fows rom contining

operations:



Annual report 2008


chapt

Smmary o cash fows rom contining operationsYear ended at 31 December


Cash generated rom operations 1,330 1.3 1,313

Interest paid (182) (2.2) (178)

Income taes paid (225) 54.3 (492)

Net cash rom operating activities 923 43.5 643

Net cash sed or acqisitions and disposals (18) (110.2) 177

Net cash sed or capital investments and disposals (304) (7.0) (284)

Net cash sed or other investing activities 65 (34.3) 99

Net cash used in investing activities (257) (3,112.5) (8)

Net cash sed or dividends and other changes in eqity (631) 35.5 (979)

Net cash rom debt nancing activities 173 (49.7) 344

Net cash used in fnancing activities (458) 27.9 (635)

Changes in cash and cash equivalents 208 0

(in millions, ecept percentages)

Net cash rom operating activitiesThe net c ash rom operating activities increased by €280 million rom €643

million in 2007 to €923 million in 2008, which is amongst others de to

signicantly lower ta payments in 2008 and a strong working capital redction

osetting lower earnings.

Cash generated rom operations increased by €17 million despite a lower

prot beore ta adjsted or non-cash movements o €247 million, partially

compensated by an improvement o working capital. In 2008, the net working

capita l improved with €132 million (2007: 77).

The total cash ot fow or interest paid in 2008 is €182 million. In 2008 interest

paid mainly incldes interest on TNT’s long term borrowings o €107 million,

interest payments o €48 million relating to short term debt, realised interest on

oreign crrency hedges o €19 million and interes t paid on taes o €1 million.

The cash otfow o the total ta payments amont to €225 million compared

to €492 in 2007. Taes paid in 20 07 inclded €166 million payments r elated to

prior years.

Net cash used in investing activitiesThe total net cash sed in inves ting activities amonts to -€257 million (2007: -8).

The net cash sed or other investment activities mainly relates to interest

received (€64 million).

The net cash sed or acqisitions and disposals o €5 million mainly relates to

small acqisitions in the Mail division.

Net cash sed or capital investments and disposals relates to net capital

ependitres on property, plant and eqipment o €271 million (2007: 272)

and intangible assets o €74 million (2007: 97) and proceeds obtained rom

the sale o bildings and eqipment in 2008 o €40 million (2007: 85). The net

ependitres on property, plant and eqipment relate mainly to investments in

depots, feet replacements and investments in TNT’s network.

Net cash used in fnancing activitiesIn 2008, dividends o €324 million (2007: 298) were paid being the nal cash

dividend over 2007 o €202 million and cash interim dividend or 2008 o €122

million. Together with the cash paid relating to share by-back programmes

o €308 million (2007: 710) and received cash payments or the eercise o

employee stock option o €1 million (2007: 29) the total net cash sed or

dividends and other changes in eqi ty amonted to €631 million (2007: 979).

The net cash rom debt nancing activities amonted to €173 million and

mainly relates to the proceeds on long term borrowings ollowing the newly

issed benchmark erobond oering £450 million de in Agst 2018. The

£450 million proceeds have been swapped into €568 million with a copon

o 7.14%. Newly acqired short term bank debt amonts to €113 million, and

€222 million has been issed nder TNT’s commercial paper programme. The

total repayments mainly relate to the repayment o TNT’s 5.125% December

2008 erobond o €646 million and to repayments o short term bank debt

o €83 million.





chapter 3

Detailed inormation on capital ependitres and proceeds

Capital ependitres and proceedsYear ended at 31 December


Property, plant and eqipment 271 (0.4) 272

Other intangible assets 74 (23.7) 97

cash out 345 (6.5) 369

Proceeds rom sale o property, plant and eqipment 40 (52.9) 85

Disposals o other intangible assets 1 0

cash in 41 (51.8) 85

Netted total 304 7.0 284

(in millions)

Capital ependitres

projection or 2009The total projected 2009 capital ependitres on propert y, plant and eqipment

and other intangible assets or TNT’s divisions is estimated to be arond €250

million. This capital ependitre is epected to be spent on similar types o

property, plant and eqipment and other intangible assets as in 2008. TNT

believes that the net cash provided by its operating activities will be scient to

nd the capital ependitres.

Free cash fow and net debtThe Free Cash Flow o the grop, as dened in chapter 2, amonts to €683

million (2007: 444). O the €683 million, an amont o €324 million was

distribted as dividend and €308 million as share by backs. The net debt,

dened as total interest bearing debt (long and short term) mins cash and

other interest bearing assets per the end o the year, amonts to €1,744 million

(2007: 1,789).

Otlook 2009De to the highly ncertain macroeconomic and bsiness environment, instead

o giving an otlook or 2009 on revene growth and operating margin, TNT

will provide certain indications only:

Epress: revenes epected to decline de to volme declines and lower –

el srcharge

Mail: as previosly gided, addressed volmes in the Netherlands epected –

to show an increasing rate o decline

Additional pension P&L charge: €40 million compared to 2008; mainly Mail –

Approimately €400 million total cost savings targets prsed –



Annual report 2008

chapt

THE ExPRESS DIVISION

GeneralTNT’s Epress division provides on-demand door-to-door epress delivery

services or cstomers sending docments, parcels and reight. TNT oers

regional, national and worldwide epress delivery services, mainly or bsiness-

to-bsiness cstomers. The epress services TNT provides and the prices TNT

charges are primarily classied by transit times, distances to be covered and

sizes and weights o consignments.

TNT Epress’ cstomers are small and medim enterprises, major acconts andglobal cstomers. Each category o cstomers is managed by dedicated teams

Principal acilities o Epress

Location Owned / Financial lease Principal se Site area

Liège, Belgim Owned1 International air hb 103,709 sq. metres

Wiesbaden, Germany Owned Sorting centre and road hb 65,500 sq. metres

Arnhem, the Netherlands Owned International road hb 148,000 sq. metres

Brssels, Belgim Lease Sorting centre and road hb 67,150 sq. metres

1 – The land is on a long term operating lease.

The ollowing aircra t were in se at the end o 2008:

Specication o aircrat in se

TypeTotal

nmber Total capacity

in kilos

Owned 29 654,800

Leased 10 142,000

Chartered 7 102,000

Total 46 898,800

Inclded in the 29 owned aircrat are nine aircrat that will be decommissioned.

and processes. TNT bilds strong relationships with its cstomers throgh

reglar personal calls and visits, as well as a wide range o commnications

media.

TNT has etensive integrated road and air networks in Erope, with dense

coverage in 35 Eropean contries. This gives TNT a leading position in the

Eropean market. TNT’s worldwide coverage etends to more than 200

contries. In 2008, TNT contined to bild its positions in emerging marketswhile enhancing connectivity between those markets and Erope.

Strategy and actionsTNT’s Epress division aims to be the leader in day-certain and time-certain,

door-to-door delivery, ocsing on bsiness-to-bsiness cstomers, with the

widest (vale-creating) geographical coverage.

TNT is a global epress player, whose strateg y is to ‘Focs on Networks’ by:

strengthening its nmber one position in Erope in national and intra- –

Eropean fows,

bilding the nmber one position in selected emerging markets like India, –

Soth-east Asia, China and Soth America,

providing a continm o delivery prodcts and services, which also inter- –

connects with the Mail division, and

epanding its position in special services (a range o feible and vale-added –

soltions that are complimentary to its network services).

More specically, TNT aims to achieve its strategy by:

maintaining a balanced cstomer portolio (large, medim, small and ad hoc –

cstomers),

ocsing on service qality, –

strengthening the TNT brand and increasing top-o-mind awareness o the –

comprehensive range o its reliable on-demand epress delivery services,providing high-qality and cost-eective intra-Eropean services throgh –

connecting its strong domestic and international bsinesses,

rther tning the balance between network capacity and short and medim –

term bsiness development needs,

achieving a step-change in cost control and network optimisation, –

creating medim term protable revene growth throgh bolt-on –

acqisitions,

contining to deliver otstanding levels o cstomer satisaction, –

developing leading-edge spport technologies that provide added-vale or –

cstomers, and

recriting, developing and managing its employees towards the highest –

standard o cstomer care.

The principal Epress acilities are as ollows:




The Express division

chapter 4

In 2008, TNT’s Epress bsiness rthered its Focs on Networks strategy

with an emphasis on network optimisation, cost control and contined

transormation o its new domestic platorms in China, India and Brazil.

Based on inormation and analysis o competitors across several market

segments in varios contries dring ve years, TNT’s core domestic and intra-

Eropean market is calclated as having a size o €21 billion (based on TNT’s

narrow denition, which measres the bsiness-to-bsiness epress market,

domestic and intra-Erope only, and is based on 2007 data). As cstomers

43% Other

18% 18%

16% DHL

5% Royal Mail

2% FedEx

9% UPS

7% La Poste

Domestic:Industry

consolidation

Intra-region: – New preferred customers – Share-of-wallet increase – Cross-border / – regeionalisation

43% Other

16% DHL

5% Royal Mail

2% FedEx

9% UPS

7% La Poste

Track & traceReturn / repair

System interfaces‘dedicated customer service centres’

+ Intercontinental+ Deferred+ Courier + Value-added services

– Non-focus industry

B2B Express market, Domestic and Intra-Europe

2007: 100% = € 35 billion2007: 100% = € 21 billion

Bsiness perormanceIn 2008, TNT’s Epress bsiness achieved revene growth o €102 million

(1.6%) and an operating margin o 5.7%. The nderlying organic revene

growth, adjsted or a el srcharge o €183 million, was -1.2%. The economic

downtrn, particlarly in Erope, led to signicant pressre on the bsiness

largely becase o lower trading volmes rom eisting cstomers. As a reslt,operating income was adversely aected by sharply lower volmes in premim

Epress prodcts (air), which cold not be compensated by cost redctions in

the network.

The volme development in TNT Express refec ted these developments and

indicates three step-downs in the economic activity in the last six months o

2008 in Erope (see chart on next page). In weeks 25 and 26, or the rst time

increasingly look or a more varied epress prodct and service oering, TNT

has eplored opportnities or epanding its addressable market. TNT now

estimates the addressable market vale at €35 billion. Some o this increase

stems rom the potential or enhancing TNT’s Economy prodcts with many o

the service attribtes that cstomers have come to epect, sch as tr ack-and-

trace, door-to-door delivery and indstry-leading cstomer service spport.

More generally, by sing its already eisting sales platorm and networks, TNT

can attack a larger market by selling added-vale soltions, leveraging rom an

already comprehensive prodct por tolio.

a sharp decline in volmes (in comparison with the previos year) in the air

express segment in Erope was noticeable. In the month o September that

decline accelerated to a level o arond 10%. And in the last two trad ing months

o 2008, the economy seemed to soten even r ther, leading to a decline o air

volmes o close to 20%. until the third qar ter, the volmes in the interna tionaleconomy road network s in Erope contined to grow, bt as o November also

there the growth trned sharply negative. This negative development orced

TNT to revise its 2008 otlook or Epress twice. Operating income redced

to €376 million rom €599 million in the prior year. In 2008, costs relating to

provisions and impairments were €70 million in order to contine to align the

bsiness to lower volmes going orward.

B2B Epress market: epanded market potential



Annual report 2008

The Express div

chapt

FY 08Q4 08Q3 08Q2 08Q1 08Q4 07

Road

Air

Air and Road volumes% change year-on-year, rebased to Q4 07=100

This eperience with sharp volme declines was not TNT’s alone; the air reight

sector reported the same negative trend (see chart). With this sectorwide

trend in mind, TNT believes that volme developments in 2009 will remain

negative compared to 2008, particlarly in premim (air) prodcts.

European trend in air freight marketyear-on-year % growth in tonne kilometres

-25

-20

-15

-10

-5

0

5

10


J F M A M J J A S O N D

2006 2007 2008

J F M A M J J A S O N D J F M A M J J A S O N D

Move from Express to Economy Express in 2008

Day-uncertain

Standard

Documents

Services Ofce

Parcels

Trade Distribution

Centre

Pallets

Production Factory

Freight

Same-day

Day-certain /

Expedited

Time-certain /

Next day

1 kg ~ 30 kg 1.000 kg Weight

Speed Volume growth 1st half year 2008

Express

1.1%

5.4%

Volume growth 2nd half year 2008

Economy Express

Economy

Express

Express

-9.0%

-0.4%Economy

Express

Express

Down-trading in Epress in 2008Combined with the downtrn in trading volmes, TNT contined to see a

rther shit rom its International (premim) Epress prodcts to Economy

Epress prodcts in 2008, a s trctral change that appeared more prononced

in 2008 as cstomers soght to control costs. In 2008, Epress prodct volme

decreased by 4.0% while Economy Epress prodct volme increased by 2.5%.

Network optimisation and cost savingsThe network optimisation plan annonced in late 2007 aimed to improve

integration o the air and road networks to gain cost savings while maintaining

service levels. This plan is even more relevant in a recessionary climate, in which

network cost redctions and operational eciency are key to addressing

declining trading conditions.

The signicant worsening o trading volmes throgh the second hal o 2008

prompted an amplication o these cost-control and eciency initiatives. On

4 December 2008, TNT detailed strctral cost savings. For 2009/2010, the

previosly targeted €100-125 million strctral cost savings were increased

to €170-210 million (o which €90-125 million are to be achieved in 2009), to

be achieved mainly throgh rther network optimisation in road networks

and centralisation o cstomer services. In addition, Epress will be ready to

implement rther volme-dependent contingencies p to an amont o €120

million savings in 2009.

Technology and bsiness system soltions contine to be critical element s and

enablers in achieving the bsiness strategy. Standardisation throghot TNT’s

global organisation contines with the development o common systems. In

March 2008, TNT lanched its e-invoicing soltion oering secred electronic

invoices in over 30 contries, inclding most Eropean contries, Astralia,

Singapore, China (Hong Kong), Soth Arica, Kwait, and the united Arab

Emirates. With increasing e-invoicing ptake, redction in administration costs

can be achieved.

Standardisation throghot the global organisation o TNT Epress contines

with the development and implementation o common systems or international

and domestic processes. There was accelerated progress in 2008, reslting in

136 depots now sing the new Operations Data Entry System. In October





chapter 4

2008, the Road Operational Control System was sccesslly implemented

overnight in 31 Eropean contries.

Beyond helping to achieve needed cost savings, TNT’s contined ocs on

technology innovation provides a key dierentiator when integrating its epress

services with cstomers’ systems.

International and domesticEconomic activities in Erope hardly epanded in 2008 compared to 2007.The Eropean epress market grew slower than GDP, mainly becase the

indstry is one o the rst to notice a drop in volme demand. Competition

in the ragmented Eropean epress market intensied rther in 2008, with

rther market consolidation in East Eropean markets. In the matre Western

Eropean markets, the ocs has been on improving eciency, improving

cstomer service, and epanding coverage and service levels. Parcel operators

have contined to edge into the epress market, and initiatives sch as

epansion o parcel shops, drop-o points and parcel stations have illstrated

the perceived increased importance o the bsiness-to-consmer market and

lower-cost bsiness-to-bsiness parcel deliveries.

The economic downtrn negatively impacted trading volme, particlarly

in premim air services in Erope. In 2008, the large Eropean contries

(the united Kingdom, France, Germany and Italy) as well as the Benel saw

moderate organic revene growth, albeit at a lower pace than last year. Cost

control measres were implemented, with a ocs on lowering overhead costs

and achieving tighter operational planning.

As part o the network optimisation plan, ten airport connections in Erope

were closed in 2008, leading to net annalised cost savings o €20 million o

which €5 million was realised in 2008.

Otside Erope, Astralia contines to per orm well throgh organic revene

and volme growth. The domestic epress market o Astralia is the largest

market in the Pacic where TNT holds a strong position.

The cost redction measres within the amplied network optimisation

plan are complemented by TNT’s aim to improve continosly operational

eciency by strengthening its air and road networks. TNT has a more e tensive

epress delivery road network in Erope than any o its competitors. In 2008,

TNT contined to bild on its etensive road network by connecting its

Eropean road network to ukraine’s largest overnight network. The new rote

will strengthen network connectivity to and rom Erope’s astest growingeconomies in the east.

Emerging platormsIn 2008, TNT’s emerging platorms in China, India, Soth-east Asia, Middle East,

Rssia, Trkey and Soth America contined to achieve doble-digit revene

growth and margins slight ly below otlook target . Towards the end o 2008, the

impact o negative global economic activity became also visible in the emerging

platorms.

South-east Asia, ChinaEconomic conditions contined to be relatively avorable in 2008 de to

sond ndamentals and growing domestic demand. Never theless, economies

with high international eposre were increasingly impacted by slowing

demand in Erope and the Americas . China and India were driving economic

growth in the region. Other markets sch as Vietnam and the rest o Soth-

east Asia contined to attract investment and are estimated to accelerate

growth and demand or epress transportation. The segmentation lines in the

Asian international air transportation market are becoming aint as the border

between air epress and air reight is converging.

In April 2008, TNT annonced its plan to invest €100 million over ve years to

strengthen its network coverage, connectivity and inrastrctre to captre

reight opportnities between Soth-east Asia, Erope and China. This is inline with TNT’s strategy to bild a leading position in these regions and to

provide innovative reight soltions or the growing healthcare, high-tech, and

eqipment and machinery sectors.

Dring 2008, TNT enhanced the operation o its Boeing 747-400 reighter. The

reighter now travels between Singapore, Shanghai and Erope three times a

week, which enhanced operating eciency and, more importantly, oered new

soltions to TNT’s cstomers in all three markets.

2008 also saw TNT’s niqe and market-leading Asia Road Network (ARN)

epanded into China. The pioneering international road services now oered

by the TNT ARN provide cstomers with niqe transpor tation soltions that

allow a secre and day-denite service that is cheaper than airreight and aster

than sea.

Additionally, TNT added eight new branches to its international Epress

network in China. This enables TNT to develop rther i ts network and epand

the international epress services in China’s ast growing economic regions.

IndiaThe epress sector beneted rom India’s rther integration into the global

economy and development o the domestic market. It also emerged as a

competitive epress market with a trend o market consolidation throgh

strategic acqisitions.

In Agst 2008, TNT sccesslly integrated Speedage Epress Cargo Services

(Speedage) into its global Epress network. Speedage, a domestic road epress

company, was acqired by TNT in September 2006. The integration will rther

strengthen TNT’s strategy to become the market leader in India, sing an

integrated air and road network and operating nder a single brand.

South America

In Soth America, there was relatively good economic growth in Brazil, albeit ata slower pace than in previos years, de to the other crrencies’ depreciation

and the slowdown in the uS economy. Argentina was somewhat less impacted,

as a relatively large share o its eport s went to Asia.

Dring 2008, TNT contined its progress towards integration o Epresso

Mercúrio S.A. (Mercúrio), a domestic road epress company acqired by

TNT in Janary 2007. In May 2008, Mercúrio was rebranded as TNT Mercúrio.

Combining the two well established names aims to strengthen TNT’s leadership

position in Brazil as a service provider o both domestic and international reight

services. TNT will invest in new vehicles, depots and inrastrctre as well as

a state o the ar t call centre in Brazil. TNT is also looking into strengthening its

air connectivity between Brazil and Erope and road connectivity to the other

Soth American contries.



Annual report 2008

The Express div

chapt

Epress nancial overviewYear ended at 31 December



as % o total operating revenes TNT 59.7 59.5


Total operating epenses (6,284) (5.4) (5,961)

Total operating income 376 (37.2) 599

as % o epress operating revenes 5.7 9.1


Epress operating revenesYear ended at 31 December


International & Domestic 5,438 (0.2) 5,448

Epress Emerging Platorms1 1,215 10.2 1,103

Total operating revenues 6,653 1.6 6,551as % o total operating revenes TNT 59.7 59.5


1 – Apa, India, China, LAM, MEA, Rssia and Trkey.

Epress operating epensesYear ended at 31 December


Cost o materials 325 21.7 267

Work contracted ot and other eternal epenses 3,330 2.4 3,252

Salaries and social secrity contribtions 1,996 4.3 1,913

Depreciation, amortisation and impairments 261 24.9 209

Other operating epenses 372 16.3 320

Total operating expenses 6,284 5.4 5,961


Financial resltsIn 2008, TNT’s Epress division earned revenes o €6,653 million. The Epress

division acconted or 59.7% o TNT’s grop operating revenes and 38.3% o

TNT’s grop operating income.

The ollowing tables set ot the nancial perormance o TNT’s Epress division

or the past two years:





chapter 4

Epress operating statisticsYear ended at 31 December

2008 2007

Nmber o consignments (in thosands) 230,431 228,199

Nmber o tons carried 7,451,803 7,390,779

Average o nmber o working days 254 252

Nmber o depots/hbs 2,376 2,331

Nmber o vehicles1 26,610 26,760

Nmber o aircrat1 46 47

1 – A sbstantial nmber o the vehicles and aircrat are not owned bt leased or sbcontracted.

Dring 2008, TNT’s Epress division realised modest growth in operating

revenes de to strong perormance in the rs t hal o 2008 throgh volme

growth in both domestic and international prodcts. This was oset by negative

growth in the second hal o the year de to the economic downtrn especially

in Erope. Compared to last year operating income was lower by 37.2%

impacted by lower capacity tilisation o the networks de to lower volmes

and infationary pressres de to the peak in el prices dring Jly. Ater

adjsting or the restrctring provision and impairments operating income

was 25.5% lower than last year.

Epress operating revenesTotal operating revenes o TNT’s Epr ess bsiness or 2008 increased by €102

million (1.6%) compared to 2007. The organic growth in operating revenes

was €327 million (5.1%), partl y cased by the el srcharge which increased by

€183 million compared to 2007. The remaining increase in operating revene

was achieved mainly rom solid growth in the rst hal o 2008 and good growth

in emerging markets which, nlike Erope, were not as signicantly impacted

by the global economic downtrn. The economic downtrn in the second hal

o 2008 saw revene decline, particlarly in Western, Central and Sothern

Erope. Eastern Erope, Astralia, Asia and Soth America have been re latively

resilient to the economic downtrn. Foreign echange eects had a negative

eect o €241 million (3.7%), mainly de to the strengthening o the ero against

most crrencies bt predominantly the British pond. The eect o acqisitions

amonted to €16 million.

International and domesticInternational and domestic bsiness showed an overall revene decline o €10

million (0.2%). Revene grew organically by €201 million (3.7%) which wasoset by a negative ore ign echange eect o €211 million (3.9%), mainly de to

the strengthening o the ero verss the Bri tish pond.

Emerging platormsEmerging platorms achieved overall revene growth o €112 million (10.2%),

with an organic growth o 13.0% oset by negative oreign echange eect o

2.8%. Emerging platorms have not been signicantly impacted by the economic

downtrn with good growth in Middle East, China and Soth America .

Epress operating epensesOperating epenses o TNT’s Epress bsiness or 2008 increased by €323

million (5.4%) compared to 2007.

The increase in cost o materials by €58 million (21.6%) was de to higher el

costs in 2008. Work contracted ot increased by €78 million (2.4%) mainly de

to infationary increases (partly de to higher el costs or sb-contractors)

oset by the volme related decreases in the second hal o 2008, together with

the start o TNT’s cost optimisation programmes. Salaries and wages increased

by €83 million (4.3%) de to infation as well as redndancy costs o €28 million

mainly rom redndancy plans in the Eropean contries. The increase in

depreciation and amortisa tion by €52 million (24.9%) was mainly de to aircra t

impairment costs (€37 million) or the A300 and B146 as part o the air network

restrctring plan. Other operating epenses increased by €53 million (16.4%)

mainly de to higher bad debt provisions and vehicle epenses and €5 million

or other restrctring costs.

Epress operating incomeThe Epress bsiness operating income or 2008 decreased by €223 million

(37.2%) compared to 2007 or by €153 million (25.5%) ater eclding

restrctring costs and impairments.

The decline in operating income was primarily de to the economic downtrn

which has redced volmes. This has impacted predominantly TNT’s Eropean

bsinesses. TNT’s emerging platorms bsiness has not been signicantly

impacted by the economic downtrn with good reslts in Soth-east Asia,

Middle East and Soth America.

Operating income as a percentage o revene (ROS) was 5.7% in 2008

compared to 9.1% in 2007 de to the lower volmes and margin pressre

cased by the infationary pressres as well as the restrctring costs and

impairments.



Annual report 2008

The Express div

chapt

The capital ependitres shown in the table above are eclding the new

nance leases , as they do not lead to cash fows.

Capital ependitre on property, plant and eqipment and other intangible

assets by TNT’s Epress bsiness totalled €247 million in 2008, which was a

decrea se o 7.1% compared to 2007 de to lower IT development s.

Some o the larger Epress capital ependitres in 2008 inclded Oslo depot

(€12.3 million), Bratislava depot (€6.9 million), uK feet replacement (€26.9

million), Astralia feet replacement (€5.3 million), Mercúrio feet replacement

(€9 million) and Liège hb epansion (€5.1 million).

Dring 2008, capital ependitres on other intangible assets totalled €50

million and related primarily to the enhancements to TNT’s Global IT Systems.

Capital ependitresYear ended at 31 December


Property, plant and eqipment 197 197

Other intangible assets 50 (27.5) 69cash out 247 (7.1) 266

Proceeds rom sale o property, plant and eqipment 10 (47.4) 19

Disposals o other intangible assets 0 0

cash in 10 (47.4) 19

Netted total 237 247


Epress capital ependitres

and proceeds




chapter 5

THE MAIL DIVISION

GeneralTNT’s Mail division provides mail, mail related, and parcel services to its

cstomers. Its matre bsiness, which has its origins mainly in TNT’s home

market the Netherlands, is organised in the bsiness line Mail Netherlands.

This bsiness line is responsible or mail services in the Netherlands, inclding

the provision o the niversal service. Related are the data and electronic

commnication activities, operating nder the brand name Cendris, and the

cross-border mail services provided throgh the joint ventre Spring G lobal

Mail.

TNT’s emerging mail activities inclde TNT’s mail services otside the

Netherlands. TNT Post, throgh its bsiness line Eropean Mail Networks,

is active in the Netherlands and seven other contries, where it is a main

challenger o the incmbent postal operator. These activities inclde both

addressed and naddressed mail.

-5

-4

-3

-2

-1

0

200820072006200520042003200220012000

Annual volume decline

Cumulative volume development

Volume decline 3%-4% on

average (with slightly higher

expected decline in the rst

two years of full liberalisation)

Preparation for further volume

decline in the range of around

6% in the period to 2012 due

to changes in behaviour of

senders and receivers of mail

Revenue extention:

European Mail Networks

Cost management:

Master plans I + II

Revenue extention:

Growth initiatives

Cost management:

Master plan III

Overview volume development and compensating strategic initiatives

TNT Mail annual and cumulative volume decline in % 2000 – 2007

2008 onwards

Measures covering impact

Measures covering impact

TNT’s Mail division provides standard parcel services in the Netherlands and

Belgim throgh TNT Post Pakketser vice or both domestic and cross-border

parcel distribtion.

Strategy and actionsIn Mail, TNT’s strategic intent in phase I o the Focs on Networks strategy

was twoold: to prepare or the ll transition to a liberalised market in the

Netherlands and to captre growth opportnities otside the Netherlands and

in the parcel bsiness. In phase II, started in December 2007, TNT commenced

the implementation o these plans.

Mail Netherlands and related bsinessIn the Netherlands, TNT is acing increasing sbstittion by new media

(digitisation) and competitive pressre.

The main challenge or the mail market as a whole is the changing role o

traditional mail in the commnication between consmers and between

bsinesses and their cstomers. Increasing sage o electronic commnication

reslts in a signicant decline o mail volmes. These volmes are particlarly

aected by the loss o large cstomers that increasingly move to electronic

commnication in dealing with their clients. For eample, large banks are seeking

to replace paper statements by electronic statements providing or more cost

eciency and convenience or their cstomers. In 2008, tr aditional large mail

senders sch as telecommnication companies, energy providers, and banks

actively stimlated their cstomers to se electronic channels rather than mail.

The high penetration level o ast internet, eceeding 90% in the Netherlands,

catalyses that eect. Commnication patterns have signicantly changed since

this penetration reached sch a high level. This is most clearly illstrated by the

act that in 2008 TNT saw a considerable dec line o single item mail.

Changing commnication patterns infence the demand o bsiness

cstomers or mail services. The ‘traditional’ 6 days a week net day delivery

o TNT is no longer reqired or the demand in large segments o the market .

Thereore, competitors and TNT’s sbsidiary Netwerk VSP oer less reqent

delivery or addressed mail, one or two times a week, at lower prices. Netwerk

VSP now has a market position amongst TNT ’s main competitors, Sandd and



Annual report 2008

The Mail div

chapt

Ambition level for TNT Post ParcelsGrowth strategy in two dimensions

Focused growthper country

€420m (2008)

Broker model for international ows

€1 billion(2015)

European positionfor B2B / B2C parcels

Domestic

Cross-border

Europe

Benelux

1 – excluding e-fullment and at margin 10% - 12%

Optimise costs efciencies with letter mail

– Regulated as USO provider

As logistics provider, for instance

transport for letter mail

Build and strengthen Benelux position:

create an unbeatable position with a broad

service portfolio

Develop and grow broker model as

driver for international expansion;

focus on suitable acquisition opportunities

0

0

1

1

2

3

3

2

SelektMail. TNT estimates that its competitors collectively have a market

share o arond 13%.

Competitors may crrently distribte direct mail regardless o weight and

letters over 50 grammes. This constittes abot 50% o the market. Once the

mail market is lly liberalised, TNT epects that competition will also target the

segment o letters below 50 grammes.

As a conseqence o the impact o electronic media on the demand or mail

services, TNT anticipates that the mail volmes decline, which was in the rangeo between 3% and 4% on average between 2000 and 2008, will be arond

6% in the period to 2012. This necessitates additional cost management and

restrctring programmes that will rther impact the employees at TNT Post

in the Netherlands on top o the eisting Master Plans that were annonced

in 2006. In addition to the implementation o these plans, TNT is working on

a complete redesign o its Mail network. Timing and content o t his redesign

will largely depend on the otcome o the negotiations o the collective labor

agreement or prodction workers o TNT and o a collective labor agreement

or the sector, and on the reglatory ramework. The target is that this redesign,

crrently called Master Plan III, will start in 2011 and will lead to €200 million

annal savings as o 2017. This comes on top o the €395 million that is inclded

in the eisting plans o which € 86 million was realised in 2007/2008 and €194

million is planned or 2009-2012.

The plans, both the eisting and those in preparation, will enable TNT to

deal with the combined impact o the transition o the mail market and

economic eects.

Emerging mail marketsSince the start o Eropean Mail Networks, its activities have epanded rom

mainly naddressed in the Benel contries to addressed mail in Germany, the

united Kingdom and Italy. TNT intends to increase its ocs on addressed mail

delivery in these larger contries. Frthermore, TNT will take into accont the

market opportnities or vale-added services to spport mail, like the Formla

Certa ser vice with track-and-trace on individal mail items in Italy. In addition,

TNT recognises that reglation has an impact on it s bsiness opportnities,

or instance in Germany and in the united Kingdom. In Germany, vale added

ta (VAT) reglation and reglatory discssions on minimm wage remain

ncertain despite the rling o the Oberverwaltungsgericht o 18 December

2008 (see below nder Bsiness perormance - emerging mail markets).

Nevertheless, TNT will contine to prepare or r ther growth in this contry.

In the united Kingdom, TNT provides services throgh down stream access.Althogh reglatory ncertainty makes it diclt to estimate its viability, pilots

are crrently being held with end-to-end delivery services. In December 2008,

TNT epressed its interest in eploring a strategic par tnership with Royal Mail.

These eplorations are in line with TNT’s ambition to develop a sbstantial

position in the uK mail market . See or more inormation chapter 3.

ParcelsIn parcels, volmes are growing among other things as a conseqence o the

growth o e-shopping. As an important player in to-consmer delivery in the

Netherlands, TNT Post Pakketservice benets rom this growth and nds itsel

well positioned to etend its portolio. Net to the traditional home and oce

delivery, TNT Post Pakketservice is developing cargo and pallet distribtion and

is epanding in Belgim and in cross-border services. Frther, retail distribtion

oers new opportnities or TNT Post Pakketservice.

As part o its growth initiatives, TNT will strengthen its position in the parcel

market throgh a combination o e-llment services, special mail and parcel

services, and shop and media logistics. Frthermore, sing its international

contracts and services TNT Post Pakketservice will strengthen its position

as a broker or international parcel distribtion. This broad range o ser vices

will be provided throgh integrated networks where possible and specialised

networks where necessary.




The Mail division

chapter 5

Growth initiatives: e-commerceTNT Post is developing a range o new initiatives that leverage on its skills and

brand position. Electronic media are not jst a threat to TNT. On the contrary,

they oer opportnities as well. TNT has identied two growth initiatives that

are crrently being developed. One initiative was highlighted above nder

Parcels, the other involves e-commerce.

TNT has bilt eper ience in many links o the e-commerce vale chain. Mch

o this eperience was gained throgh TNT’s position in the mail market, e.g. indelivery and retail via websites sch as www.tntpost.nl. With Cendris, TNT is

well established in data and docment management and call centres. Together,

Cendris and TNT Post have eperience in both online and ofine marketing.

Frthermore, in the area o llment TNT is well positioned with the Cendris

sbsidiary Eromail.

Crrently, TNT integrates these links in the chain to provide cstomers the

TNT Post services rom its website www.tntpost.nl. This incldes ordering

stamps, bt also services like a photo service, git shop, ordering magazines and

pharmacy services o Nationale-Apotheek.nl, in which TNT Post participates.

This portolio and eperience orm a solid stepping stone to oering an

integrated soltion or web-based bsinesses. TNT will develop a position as an

online retailer or end-cstomers, and as a ser vice provider and integrator or e-commerce bsinesses. This will be realised throgh a by-and-bild strategy:

TNT will rther develop its own eperience where possible, and acqire

additional capabilities where necessary.

TNT Post positions itself both as online retailer and e-commerce service provider

TNT as online retailer TNT as service provider and integrator

Retail Marketing

Retail Marketing Marketing

Webshopservices

Payment Fullment Delivery Customer

service

Webshopservices

Payment Fullment Delivery Customer

service

e-commerce trafc generator e-commerce value chain

– Experienced shop manager

– Multi-channel marketing

– Customer intelligence

– Convenience

– Integration

– Knowledge

– Safety

http://www.bruna.nl

http://www.portal.nl

T N T ‘ W e b

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T N T ‘ F i n a n

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y m e n

t s

T N T

‘ C u s t o m

e r S

e r v i c e ’

T N T

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l m e n

t & D e l i v e r y ’

& A d v e r t i s

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’

Bsiness perormance

Mail Netherlands and related bsinessIn 2008, TNT Post took rther steps in the Netherlands to implement the

Master Plans, and reached agreement with the works concil on the way

orward. Eqally important, signicant progress was made in the restrctring

o the labor costs, and the commercial approach was tned r ther to the

changing competitive sitation.

The Master Plans consist o commercial initiatives to maintain volme on the

one hand, and cost initiatives to save €395 million o annal costs between 2007

and 2015 on the other. Commercia l initiatives are concent rated in the cstomer

ocs programme that is crrently rolled-ot throghot Mail Netherlands.

This programme aims to strengthen the cstomer centric approach o the

organisation. Moreover, TNT will contine to dierentiate its price and

service strategy based on market demands by sing its economy services and

net-week services that are partly provided by Netwerk VSP.



Annual report 2008

The Mail div

chapt

The cost initiatives consist o eciency measres and a restrctring o the

labor costs. Dring 2008, TNT Post made a start with new working rotines

at its delivery and collection oces, leading to more standardisation. In atmn

2008, agreement was reached with the works concil on the way orward with

the pcoming eciency projects. Also, TNT made progress redcing overhead

costs.

TNT decided to restrctre the traditional post oces or which TNT Post

cooperated with Postbank in a joint ventre. The traditional post oces had

become an otlet channel that did no longer meet the needs o TNT’s and

ING’s cstomers. New retail otlets, located in shops, are being established toservice TNT’s cstomers bet ter, at lower costs.

These cost initiatives mentioned above aim at total cost savings on a strctral

basis o €45 million per 2013 compared to the level o 2007, o which €8 million

was realised by the end o 2008.

O the €395 million savings target o the Master Plans, TNT aims to realise

€125 million throgh the rest rctring o labor costs. It proved to be a lengthy

process to reach agreement with the labor nions on a new collective labor

agreement and or the rst time in 25 years TNT aced some local strikes o its

postal workers. The collective labor agreement that was conclded in spring

2008 incldes a salary increase o 3% as o 1 April 2008, and another 0.5%

conditional on agreement o separate collective labor agreements or t arget

grops with a dierent labor benchmark.

To TNT, the essential part o this new collective labor agreement is the

acceptance by the labor nions that a ndamental step needs to be taken to

come to more market oriented labor conditions or prodction workers. This

involves the conclsion o a separate collective labor agreement or prodction

workers as o April 2009, with the aim to reach a sbstantiall y lower salary level

or these prodction workers. This shold reslt in labor conditions more in

line with the level common in prodction environments in the Netherlands. The

discssions also involve accompanying transition arrangements or prodction

workers.

TNT is o the opinion that a binding collective labor agreement or the postal

sector as a whole is a condition or air competition , and the Dtch government

indeed made comparable working conditions a reqirement or ll liberalisation

o the Dtch postal market. More details on the reglatory sitation in the mail

market can be ond in chapter 11.

The volme decline that Mail Netherlands aced in 2008 was 2.7%, corrected

or workday eects. This is slightly better than the epected range o 3% to 4%

volme decline. The introdction o an economy prodct delivered throghTNT Post and a net week service delivered throgh Netwerk VSP contribted

to retaining volmes in the market. The cstomer ocs strategy proved to be

eective as well: notwithstanding losing mail volmes to competitors, TNT won

back volmes in the same range.

TNT does not restrict its activities to reactively dealing with the decline o

volmes. Technological developments are sed in developing new, innovative

services. TNT has developed TNT Billing Soltions or electronic billing. TNT

Post has taken a share in the online pharmacy Nationale-Apotheek.nl, and

oers throgh its website varios web-based ser vices sch as photo services,

postcards and personalised stamps . A sccessl initiative in 2008 was Try Now,

which invites cstomers to order samples o new prodcts via sms or internet.

This enables manactrers to directly commnicate with their cstomers

and makes them less dependent on retail otlets. In the atmn o 2008, TNT

etended its online git shop to an online shopping mall. With developments

like this, TNT maintains a leading position to serve changing cstomer needs.

The cross-border mail activities o TNT are provided throgh a 51% share in

G3 Worldwide Mail N.V. (Spring Global Mail), with Royal Mail Investments

Limited and Singapore Post Limited being the other partners. This joint ventre

provides cross-border mail services in Erope, Canada and the Asian Pacic

area. It ses the services o its three shareholders, and rthermore has its own

contracts with local delivery agents.

Cross-border mail volmes are strongly infenced by e lectronic commnication.

The speed and cost advantage o electronic media are the main reasons or

stronger volme declines. At the same time, the slow pace o liberalisation

infences the bsiness model o Spring Global Mail. As a conseqence, cross-

border mail revenes were stagnant. Spring Global Mail is crrently broadening

its activities to parcels.

Emerging mail marketsIn addressed mail delivery the ocs was on the major contries Germany, the

united Kingdom and Italy.

Bsiness perormance was infenced by reglatory discssions in Germany on

a minimm wage generally binding or all companies in the postal and delivery

services sector, and the VAT eemption Detsche Post enjoys. At the same

time TNT ocsed on a healthy nderlying perormance o the organisation.

TNT challenged the German government regarding the minimm wage, as it

considered this minimm wage nconstittional. In its jdgement o 7 March

2008, the administrative cort in rst instance (Verwaltungsgericht ) held that the

minimm wage ordinance o 28 December 2007, which introdces minimm

wages o p to €9.80 or the postal sector in Germany, is invalid. The German

government led an appeal against that decision with the administrative cort

in second instance (Oberverwaltungsgericht ).

On 18 December 2008, the Oberverwaltungsgericht conrmed the decision o

the cort in rst instance. However, the cort also rled that TNT’s claim, being

one o three claimants, was not admissible and reerred TNT’s claim to the

labor corts. It is likely that TNT will le an appeal against the inadmissibility o

its claim, becase the decision o the cort on TNT’s inadmissibility is not in line

with recent jrisprdence as to claims o this natre.

The German government led a rther appeal (Revision) against the decision to the Federal Administrative Cort (Bundesverwaltungsgericht ) in Leipzig.

The Bundesverwaltungsgericht will only review whether the second instance

jdgement contains legal deects bt will not investigate rther the nderlying

acts. There is no s tattory time rame or the appeal proceedings.

In September 2008, the German government nally proposed a new VAT

arrangement or the mail indstry, which shold enter into orce as o 1 Janary

2010. TNT regret s that the arrangement still seems to accommodate Detsche

Post in maintaining its VAT advantage. Thereore, TNT has asked the German

government to improve the arrangement on cer tain aspects.

Despite these developments, and althogh the ncertainty aects both

cstomers and employees, TNT managed to etend its position in the German

addressed mail market. In 2008, the activities grew total revene to €248




The Mail division

chapter 5

million (2007: 227). Pending the otcome o reglatory discssions, it is still the

intention o TNT to contine to grow its activities in Germany.

In the united Kingdom, the down stream access bsiness has grown, and TNT

started pilots with end-to-end delivery in the Liverpool area. At this moment

reglation is however still a hrdle to a r ther roll-ot.

Frthermore, TNT lanched its new service TNT-IT, a hybrid mail soltion

to develop rther its services to small and medim enter prises in particlar.

Cstomers can send their letters to TNT directly rom their compter, whereprinting and rther handling is taken care o. This service, in addition to the

eisting down stream access services, has cased a solid growth o the uK

activities.

In Italy, the service Formla Certa contines to grow rapidly whilst TNT

Post Italy contines to provide services to Poste Italiane. With this service, TNT

oers a track-and-trace service on reglar mail. This service is crrently oered

in arond 25% o Italy. It is the intention to etend this over the coming years.

In 2008, TNT eperienced that naddressed mail services sered more

than addressed mail rom the economic downtrn. As a conseqence, the

perormance o naddressed delivery was less than epected, thogh the

market position o TNT compared to competitors has not deteriorated.

unaddressed mail, however, is still o vale to TNT in most contries.

Revenue development EMN: increasing focus on addressed mail and larger countries

Product development EMN 2004-2008 Country development EMN 2004-2008

Addressed

Mail related

Unaddressed

0

250

500

750

1000

20082007200620052004

0

250

500

750

1000

200820072006200520042000

– Addressed mail revenues have almost quadrupled over the last three years – notwithstanding the absence of a level playing eld that affects protability

– EMN will continue to focus increasingly on addressed mail

– From a predominantly Benelux company back in 2000 Germany, UK and Italy now comprise 80% of the revenues of EMN

– EMN will continue to focus its growth on the main mail markets in Europe

Austria, Eastern Europe

Germany, Italy, UK

Benelux

ParcelsThe standard parcel bsiness is developing rapidly, strongly driven by the

growth o web shopping, TNT’s broadening bsiness-to-bsiness portolio,sch as payment and IT ser vices and spporting services or web shops, and the

growth o cross-border parcel volmes.

As a conseqence o this rapid growth, the bondaries o the operational

capacity are within sight. Thereore, TNT decided to open a orth parcel

sorting centre in 2009, and to review its entire operational strctre or parcels

as o 2012. Frthermore, TNT is improving its IT system in order to provide the

most developed IT services in the indstry to its cstomers.

TNT is in the process o broadening its parcels portolio. Dring 2008,

TNT developed cargo services with the integration o the earlier acqiredAAA-Logistics. Frther, the rst steps were taken in the area o shop logistics

with the signing o a contract with Aldipress.



Annual report 2008

The Mail div

chapt

Mail nancial overviewYear ended at 31 December





Total operating epenses (3,638) 0.9 (3,672)

Total operating income 633 1.1 626

as % o mail operating revenes 14.9 14.8


Mail operating revenesYear ended at 31 December


Mail Netherlands and related bsiness 2,751 (3.9) 2,862

Emerging Mail & Parcels 1,494 8.9 1,372

Total operating revenues 4,245 0.3 4,234


o which Emerging Mail & Parcels (eclding Germany) 1,246 8.8 1,145


Mail operating epensesYear ended at 31 December


Cost o materials 158 1.3 156

Work contracted ot and other eternal epenses 1,473 5.7 1,394

Salaries and social secrity contribtions 1,532 (5.1) 1,614

Depreciation, amortisation and impairments 131 (3.0) 135

Other operating epenses 344 (7.8) 373

Total operating expenses 3,638 (0.9) 3,672


Financial resltsIn 2008, TNT’s Mail bsiness earned revenes o €4,245 million, a 0.3% increase

compared to 2007. Mail acconted or 38.1% o TNT’s grop operating revenes

and 64.5% o TNT’s grop operating income.

In 2008, approimately 22% o TNT’s Mail operating revenes and approimately

8% o the grop’s operating revenes (2007: 23% and 9%) were derived rom

reserved postal ser vices in which TNT generally was not sbject to competition.

In 2008, TNT eperienced a volme decline o 2.4% per annm compared to

2007. The nderlying decline o volmes adjsted or a comparable nmber

o working days per year was 2.7% per annm. This is slightly better than the

gidance TNT gave in 2004 o an average volme decline between 3% and 4%

annally rom 2004 p to 2012 onwards. The average decline since 2004 is arond

3.5% per annm. The decline in 2008 was de in part to sbstittion by electronic

media and accelerated by competition, ose t by varios one o mailings.




The Mail division

chapter 5

Mail operating statistics1

Year ended at 31 December

2008 2007

Addressed postal items delivered by Mail Netherlands (millions) 4,693 4,807

per Netherlands delivery address (items) 601 622

per Netherlands inhabitant (items) 285 294

per Mail Netherlands FTE2 (thosands o items) 162 160

operating revenes per FTE2 (thosands o €) 100 99

average percentage o national mail sorted atomatically (%) 83 84per delivery day (millions) 15.3 15.7

1 – Comparitive statistics have been adjsted to refect the changed bsiness lines.2 – The FTE (ll time employee eqivalent) denition is based on a 37-hor work week.

Mail operating revenesIn 2008, operating revenes rom TNT’s Mail bsiness increased by €11 million

(0.3%) compared to 2007. Organic operating revenes increased by €105 million

(2.5%). Compared to last year, 2008 showed a €26 million (0.6%) negative

acqisition and disposal eect, mainly de to disposals in 2008 (inclding uK

Parcels). Foreign echange eects (mainly the British pond against the ero)

acconted or a decrea se o €68 million (1.6%).

Mail Netherlands and related bsiness operating revenes in 2008 decreased

by €106 million (3.9%) compared to 2007. The organic volme decline in

addressed mail items was accompanied by a negative price-mi eect and other

eects.

The contined nderlying decline in addressed postal item volmes in 2008

was primarily de to atonomos decline in single items and redced demand

or blk mail as a reslt o cost saving programmes initiated by some o TNT’s

key cstomers as well as to the contined sbstittion by electronic media.

Emerging Mail and Parcels operating revenes increased by 8.9% in 2008. The

organic growth in operating revenes o TNT’s Emerging Mail and Parcels

bsiness was €207 million (15.1%). The acqisitions and disposals in 2008 and

dring 2007 had a negative eect o €21 million (1.5%) on operating revenes.

Foreign echange eects had a negative eect o €64 million (4.7%). Main

contribtors to the operating revenes growth were the united Kingdom,

Germany, Belgim, Italy and Parcels Netherlands, which showed doble digit

growth.

Other income decreased to €26 million (2007: 64), mainly as a reslt o €28

million o lower sales o real estate in 2008 and gains on disposed companies

in 2007.

Mail operating epensesTNT’s Mail bsiness operating epenses decreased by €34 million (0.9%) in

2008 compared to 2007. The organic growth in operating epenses o TNT’s

Mail division was €110 million (3.0%). The disposals in 2008 and dring 2007

had a lowering eect o €76 million (2.1%) on operating epenses. Foreign

echange e ects acconted or a decline o €67 million (1.8%).

Costs or work contracted ot increased by €79 million, which is mainly

attribtable to the organic growth realised in Emerging Mail and Parcels. In

2008, costs o salaries decreased by €82 million, mainly as a reslt o lower

restrctring charges in Mail Netherlands.

Higher costs o salaries de to a new collective labor agreement in Mail

Netherlands and organic growth by Emerging Mail and Parcels were oset by

a redction o FTEs in Mail Netherlands in connection with the cost feibility

programme and €24 million lower pension costs compared to 2007. Inclded in

costs o salaries is an amont o €67 million ollowing the agreed social plan or

the restrctring o the joint ventre Postkantoren B.V.

Other operating epenses decreased by €29 million compared to 2007, mainly

de to the cost or downsizing and transerring the oneros contract and re lated

uK Parcel operations o Mail to Parcelnet Ltd. or a total amont o €23 million

in 2007. Inclded in the other operating epenses are the other res trctering

costs relat ing to joint ventre Postkantoren B.V. o €15 million.

Mail operating incomeIn 2008 the Mail bsiness operating income increased by €7 million (1.1%)

compared to 2007, on balance de to lower restrctring charges, the

epansions in Emerging Mail and Parcels, the revene and cost development

in Mail Netherlands and related bsiness and lower book gains on sale o real

estate.

In 2008, overall operating income o TNT’s Mail division as a percentage o its

operat ing revenes increased to 14.9% (2007 14.8%). Adjsted or restr ctring

costs and impai rments o €7 million (€89 million in 2008, €138 million in 2007)

operat ing income decreased to 16.8% (2007: 17.4%).



Annual report 2008 4

The Mail divisio

chapter

Capital expenditure on property, plant and equipment and other intangible

assets by TNT’s Mail division totalled €92 million in 2008, which was a decrease

of 7.1% compared to 2007. The main capital expenditures in 2008 related to

machinery and equipment (€22 million), IT (€23 million) and housing (€32

Capital expendituresYear ended at 31 December


Property, plant and equipment 69 (5.5) 73

Other intangible assets 23 (11.5) 26

cash out 92 (7.1) 99

Proceeds from sale of property, plant and equipment 31 (51.6) 64

Disposals of other intangible assets 0 0

cash in 31 (51.6) 64

Netted total 61 35


Mail capital expenditures and proceeds

million). The remaining €16 million of capital expenditure is related to various

smaller projects. Signicant investments were made in sorting machines and

software in Europe (€21 million).




chapter 6

FINANCIALSTATEMENTS



Index – to nancial statements of TNT N.V.

Consolidated balance sheets 49

Consolidated statements of income 50

Consolidated cash ow statements 51

Consolidated statements of changes in total equity 52

Notes to the consolidated nancial statements 53

Notes to the consolidated balance sheets 61

1 Intangible assets 61

2 Property, plant and equipment 63

3 Financial xed assets 64

4 Inventory 65

5 Trade accounts receivable 65

6 Prepayments and accrued income 66

7 Cash and cash equivalents 66

8 Assets held for sale 66

9 Equity 66

10 Provisions for pension liabilities 68

11 Other provisions 72

12 Long term debt 73

13 Other current liabilities 74

14 Accrued current liabilities 74

Notes to the consolidated statements of income 74

15 Net sales 74

16 Other operating revenues 74

17 Other income 75

18 Salaries and social security contributions 75

19 Depreciation, amortisation and impairments 82

20 Other operating expenses 82

21 Net nancial (expense)/income 83

22 Income taxes 83

Notes to the consolidated cash ow statements 85

23 Net cash from operating activities 85

24 Net cash used in investing activities 86

25 Net cash used in nancing activities 86

26 Total changes in cash 86

Additional notes 87

27 Business combinations 87

28 Commitments and contingencies 87

29 Financial risk management 88

30 Financial instruments 90

31 Earnings per share 93

32 Joint ventures 94

33 Related party transactions and balances 94

34 Segment information 94

35 Subsequent events 99

36 Postal regulation and concession 100

TNT N.V. Corporate balance sheets / Corporate statements of income 102

Notes to the corporate balance sheets and statements of income 103

37 Total nancial xed assets 103

38 Pension asset 104

39 Equity 105

40 Wages and salaries 106

41 Commitments not included in the balance sheet 106

42 Subsidiaries and associated companies at 31 December 2008 106

Other information 107



49

Financial statements

chapter 6

Consolidated balance sheetsAt 31 December

Notes 2008 variance % 2007

AssetsNon-current assets

1 Intangible assets

Goodwill 1,807 1,828

Other intangible assets 256 291total 2,063 (2.6) 2,119

2 Property, plant and equipment

Land and buildings 793 847

Plant and equipment 336 349

Aircraft 303 387

Other 163 163

Construction in progress 39 39

total 1,634 (8.5) 1,785

3 Financial xed assets

Investments in associates 64 83

Other loans receivable 5 5

22 Deferred tax assets 205 203

Prepayments and accrued income 33 34

total 307 5.5 325

10 Pension assets 726 22.2 594Total non-current assets 4,730 (1.9) 4,823

Current assets

4 Inventory 24 30

5 Trade accounts receivable 1,370 1,452

5 Accounts receivable 204 204

22 Income tax receivable 37 35

6 Prepayments and accrued income 298 236

7 Cash and cash equivalents 497 295

Total current assets 2,430 7.9 2,252

8 Assets held for sale 25 150.0 10

Total assets 7,185 1.4 7,085

Liabilities and equity

9 EquityEquity attributable to the equity holders of the parent 1,733 1,931

Minority interests 24 20

total 1,757 (9.9) 1,951

Non-current liabilities

22 Deferred tax liabilities 335 298

10 Provisions for pension liabilities 360 437

11 Other provisions 212 200

12 Long term debt 1,845 1,294

Accrued liabilities 4 3

total 2,756 23.5 2,232

Current liabilities

Trade accounts payable 414 336

11 Other provisions 190 162

13 Other current liabilities 890 1,188

22 Income tax payable 47 6914 Accrued current liabilities 1,131 1,147

total 2,672 (7.9) 2,902


(in € millions, except percentages)

The accompanying notes form an integral part of the nancial statements.



Financial statemen

chapter

Consolidated statements of incomeYear ended at 31 December


15 Net sales 10,983 10,885

16 Other operating revenues 169 132

Total revenues 11,152 1.2 11,017

17 Other income 35 (53.3) 75

Cost of materials (484) (423)

Work contracted out and other external expenses (4,978) (4,806)

18 Salaries and social security contributions (3,617) (3,608)

19 Depreciation, amortisation and impairments (399) (349)

20 Other operating expenses (727) (714)

Total operating expenses (10,205) (3.1) (9,900)

Operating income 982 (17.6) 1,192

Interest and similar income 70 97

Interest and similar expenses (217) (191)

21 Net nancial (expense)/income (147) (56.4) (94)

Results from investments in associates (33) 1

Prot before income taxes 802 (27.0) 1,099

22 Income taxes (242) (316)

Prot for the period from continuing operations 560 (28.5) 783

8 Prot/(loss) from discontinued operations 206

Prot for the period 560 (43.4) 989

Attributable to:

Minority interests 4 33.3 3

Equity holders of the parent 556 (43.6) 986

Earnings per ordinary share (in € cents)1 152.9 257.4

Earnings per diluted ordinary share (in € cents)2 152.5 256.1

Earnings from continuing operations per ordinary share ( in € cents)1 152.9 203.6

Earnings from continuing operations per diluted ordinary share (in € cents)2 152.5 202.6

Earnings from discontinued operations per ordinary share ( in € cents)1 0.0 53.8

Earnings from discontinued operations per diluted ordinary share (in € cents)2 0.0 53.5

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

1 – In 2008 based on an average of 363,566,403 of outstanding ordinary shares (20 07: 383,028,938). See note 31.2 – In 2008 based on an average of 364,704,745 of outstanding ordinary shares (2007: 385,071,986). See note 31.




51


chapter 6

Consolidated cash ow statementsYear ended at 31 December


Cash ows from continuing operations

Prot before income taxes 802 1,099

Adjustments for:

Depreciation, amortisation and impairments 399 349

Share based payments 16 13

Investment income:

(Prot)/loss on sale of property, plant and equipment (30) (72)

Interest and similar income (70) (97)

Foreign exchange (gains) and losses 2 3

Interest and similar expenses 215 188

Results from investments in associates 33 (1)

Changes in provisions:

Pension liabilities (209) (179)

Other provisions 40 87

Changes in working capital:

Inventory 3

Trade accounts receivable 11 (132)

Other accounts receivable (9) 38

Other current assets (45) (9)


Other current liabilities excluding short term nancing and taxes 59 (2)

Cash generated from operations 1,330 1.3 1,313

Interest paid (182) (178)

Income taxes paid (225) (492)

23 Net cash from operating activities 923 43.5 643

Interest received 64 85

Dividend received 13

Acquisition of subsidiairies (net of cash) (5) (287)

Disposal of subsidiairies and joint ventures 486

Investments in associates (13) (29)

Disposal of associates 7

Capital expenditure on intangible assets (74) (97)

Disposal of intangible assets 1

Capital expenditure on property, plant and equipment (271) (272)Proceeds from sale of property, plant and equipment 40 85

Other changes in (nancial) xed assets 1 1

Changes in minority interests

24 Net cash used in investing activities (257) (3,112.5) (8)

Repurchases of shares (308) (710)

Cash proceeds from the exercise of shares/options 1 29

Proceeds from long term borrowings 563 659

Repayments of long term borrowings (3) (20)

Proceeds from short term borrowings 367 99

Repayments of short term borrowings (729) (357)

Repayments of nance leases (25) (19)

Dividends paid (324) (298)

Financing relating to discontinued operations (18)

25 Net cash used in nancing activities (458) 27.9 (635)

Change in cash from continuing operations 208 0

Cash ows from discontinued operations

Net cash from operating activities 0 (19)

Net cash used in investing activities 0 4

Net cash used in nancing activities 0 16

Change in cash from discontinued operations 0 1

26 Total changes in cash 208 1





Financial statem

chapt

Consolidated statements o changes in total equity

Issuedshare

capital

Additionalpaid incapital

Translationreserve

Hedgingreserve

Other reserves

Retainedearnings

Attributableto equity

holders o the parent

Minority interest

Totalequity

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

Proft or the period 986 986 3 989

Gains/(losses) on cashow hedges, net o tax (1) (1) (1)

Currency translation adjustment (81) (81) (81)

Total recognised income or the year 0 0 (81) (1) 0 986 904 3 907

Final dividend previous year (183) (183) (183)

Appropriation o net income 378 (378)

Interim dividend current year (115) (115) (115)

Repurchases and cancellations o 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

Proft or the period 556 556 4 560

Gains/(losses) on cashow hedges, net o tax (13) (13) (13)Currency translation adjustment (129) (129) (129)

Total recognised income or the year 0 0 (129) (13) 0 556 414 4 418

Final dividend previous year (202) (202) (202)

Appropriation o net income 669 (669)

Interim dividend current year (122) (122) (122)

Repurchases and cancellations o shares (9) (106) (191) (306) (306)

Share based compensation 16 16 16

Other (1) 3 2 2

Total direct changes in equity (9) (106) (1) 0 497 (993) (612) 0 (612)

Balance at 31 December 2008 173 876 (212) (35) 497 434 1,733 24 1,757

(in € millions)

See the accompanying notes 9 and 39 or urther detail s relating to equity.





chapter 6

Notes to the consolidatedfnancial statements

General inormation and

description o the businessTNT N.V. is a public limited liability company domiciled in Amsterdam, the

Netherlands. The consolidated fnancial statements include the fnancialstatements o TNT N.V. and it s consolidated subsidiaries (hereater reerred

to as “TNT”, “Group” or “the company”). The company’s name changed rom

TNT Post Group N.V. to TPG N.V. on 6 August 2001 and rom TPG N.V. to

TNT N.V. on 11 April 2005. TNT N.V. was incorporated under the laws o the

Netherlands on 29 December 1997 and is listed on Euronext Amsterdam.

Since TNT delisted its American Depositary Receipts rom the New York

Stock Exchange on 18 June 2007, and its reporting obligations with the United

States Securities and Exchange Commission terminated 90 days later on 16

September 2007, TNT is no longer required to fle its annual report on Form

20-F.

The company manages the business through two divisions: Express and Mail

and via the business entity Other Networks. The Express division provides

door-to-door express delivery services or customers sending documents,

parcels and reight worldwide. The Mail division primarily provides services or

collecting, sorting, transporting and distributing domestic and international mail.

The Other Networks per orms special services that require deliveries during

the night to individually agreed delivery points.

The consolidated fnancial statements have been authorised or issue by TNT’s

Board o Management and Supervisory Board on 16 February 2009 and are

subject to adoption at the Annual Gener al Meeting o Shareholders on 8 April

2009.

Discontinued operations

On 5 February 2007 TNT completed the sale o the reight management

business to the French logistic server provider, Geodis SA. In the consolidated

statement o income or 2007 TNT has presented the net result o its

discontinued Freight Management business on a separate line ‘proft/(loss) rom

discontinued operations’.

Summary o signifcantaccounting policiesBasis o preparationThe consolidated fnancial st atements o TNT have been prepared in accordance

with International Financial Reporting Standards (IFRS) as adopted by the

European Union (EU). IFRS includes the application o International Financial

Reporting Standards including International Accounting Standards (IAS) and

related Interpretations o the International Financial Reporting Interpretations

Committee (IFRIC) and Interpretations o the Standing Interpretations

Committee (SIC).

The preparation o fnancial statements in conormity with IFRS requires the

use o certain critical accounting estimates. It also requires management to

exercise its judgement in the process o applying TNT’s accounting policies.

The areas involving a higher degree o judgement or complexity, or areas

where assumptions and estimates are signifcant to the consolidated fnancial

statements are disclosed in ‘Critical accounting estimates and judgements in

applying TNT’s accounting policies’.

The International Accounting Standards Board (IASB) has issued certain

International Financial Reporting Standards or amendments thereon, and the

IFRIC has issued certain interpretations, each o which, when adopted by the

EU, could aect TNT’s consolidated fnancial statements. Where relevant or TNT, the company has explained the standards and/or amendments and/or

interpretations below.

Interpretations and amendments topublished standards eective in 2008

IFRIC 11 – Group and Treasury share transactions (eective or annual

periods beginning on or ater 11 March 2007). Group and treasury share

transactions require a share-based payment arrangement in which an entity

receives goods or services as consideration or its own equity instruments

to be accounted or as equity-settled share base payment transaction

regardless o how the equity instruments are obtained. This interpretation

does not have an impact on the group’s fnancial statements 2008.

IFRIC 14 – The Limit on a defned beneft asset, minimum unding requirements

and their interaction clarifes when reunds or reductions in uture

contributions in relation to defned beneft assets should be regarded

as available and provides guidance on the impact o minimum unding

requirements on such assets. This interpretation does not have an impact

on the group’s fnancial statements 2008.

Standards endorsed but not yet eectivein 2008, early adoption by TNT

IFRS 8 – Operating Segments (eective or annual periods beginning on or

ater 1 January 2009) has been early adopted by TNT in 2007. This standard

replaced IAS 14 ‘Segment Reporting’ and introduces the “management

approach” to segment reporting. Consequently, this requires the

disclosure o the segment inormation based on internal reports regularly

reviewed by the group operating decision makers in order to assess each

segment’s perormance and to allocate resources to them. TNT identifes

three reportable segments being the two divisions Express and Mail and the

Other network as a third segment which is disclosed on a voluntary basis in

accordance with IFRS 8.13. There have been no changes in the reportable

segments in 2008.

Not endorsed interpretations and standards bythe EU and standards not yet eective in 2008The standards has been issued but not yet endorsed by the EU:

IFRS 3 – Business combinations- Comprehensive revision on applying the

acquisition method (eective or annual periods beginning on or ater 1

July 2009). This revised standard continues to apply the acquisition method

to business combinations, with signifcant changes. The most important

changes or the Group will be expensing all acquisition-related costs and

the re-measurement o contingent considerations through the statement

o income. The group will apply IFRS 3 (revised) prospectively to all business

combinations rom 1 Januar y 2010, subject to the endor sement by the EU.

IAS 19 – Employee benefts amendment (eective rom 1 January 2009)

clarifes that a plan amendment that results in a change in the extent

to which benefts promises are aected by uture salary increases is a



Annual report 2008

Financial statem

chapt

curtailment, while an amendment that changes benefts attributable to

past service costs give rise to a negative past service costs i it results in a

reduction in the present value o the defned beneft obligation .

TNT has preliminary assessed and reviewed the IFRS 3 revised and concluded

that the impact on the fnancial statements will largely depend on the nature

and extent o the transactions. Currently, TNT capitalises acquisition related

costs as part o goodwill, changes in contingent considerations are adjusted in

goodwill. The group is currently assessing the impact o IAS 19 amendment.

The policies set out below have been consistently applied to all the years

presented.

All amounts included in the fnancial statements are presented in euros, unless

otherwise stated.

ConsolidationThe consolidated fnancial statements include the fnancial fgures o TNT

N.V. and its subsidiaries, associates and joint ventures and have been prepared

using uniorm accounting policies or like transactions and other events in

similar circumstances. All signifcant intercompany transactions, balances

and unrealised gains on transactions have been e liminated on consolidation.

Unrealised losses are eliminated unless the transaction provides evidence o an

impairment o the asset transerred. A complete list o subsidiaries, associates

and joint ventures included in TNT’s consolidated fnancial statements is fled

or public review at the Chamber o Commerce in Amsterdam. This list has

been prepared in accordance with the provisions o article 379 (1) and article

414 o Book 2 o the Netherlands Civil Code.

As the fnancial statements o TNT N.V. are included in the consolidated

fnancial statements, the corporate statements o income are presented in an

abridged orm (art icle 402 o Book 2 o the Netherlands Civil Code).

SubsidiariesA subsidiary is an entity controlled, directly or indirectly, by TNT N.V. Control

is regarded as the power to govern the fnancial and operating policies o the

entity so as to obtain benefts rom its activities. The existence and eect

o potential voting rights that are currently exercisable or convertible are

considered when assessing whether TNT controls another entity. Subsidiaries

are ully consolidated rom the date on which control is transerr ed to TNT and

are de-consolidated rom the date on which control ceases.

TNT uses the purchase method o accounting to account or the acquisitiono subsidiaries. The cost o an acquisition is measured at the air value o the

assets given, equity instruments issued and liabilities incurred or assumed at the

date o exchange, plus costs directly attributable to t he acquisition. Identifable

assets acquired and liabilities and contingent liabilities assumed in a business

combination are measured initially at their air value at the acquisition date,

irrespective o the extent o any minority interest. The excess o the cost o

acquisition over the air value o TNT’s share o the identifable net assets

acquired is recorded as goodwill. I the cost o acquisition is less than the air

value o TNT’s share o the net assets o the subsidiary acquired, the dierence

is recognised directly in the income statement.

The interest o minority shareholders in the acquiree is initially measured at the

minority’s proportion o the net air value o the assets, liabilities and contingent

liabilities recognised. Losses applicable to the minority in excess o the minority’s

interest in the subsidiary’s equity are allocated against TNT’s interests except

to the extent that the minority has a binding obligation and is able to make an

additional investment to cover the losses.

TNT subsidiaries’ accounting policies have been changed where necessary to

ensure consistency with TNT’s accounting policies.

AssociatesAn associate is an entity, including an unincorporated entity such as a

partnership, that is neither a subsidiary nor an interest in a joint venture andover whose commercial and fnancial policy decisions TNT has the power to

exert signifcant inuence. Signifcant inuence is the power to participate in the

fnancial and operating policy decisions o the entity but is not control or joint

control over those policies.

TNT’s share in the results o associates is included in the consolidated

statements o income using the equity method. The carrying value o TNT’s

share in associates includes goodwill on acquisition and includes changes to

reect TNT’s share in net earnings o the respective companies, reduced by

dividends received. TNT’s share in non-distributed earnings o associates is

included in other reserves within shareholders’ equity. When TNT’s share o

accumulated losses in an associate exceeds it s interest in the associate , the book

value o the investment is reduced to zero and TNT does not recognise urther

losses unless TNT is bound by guarantees or other under takings in relation to

the associate.

Joint venturesA joint venture is a contractual arrangement whereby TNT and one or more

parties undertake an economic activity that is subject to joint control. Joint

ventures in which TNT participates with other party(ies) are consolidated

proportionately. In applying the proportionate consolidation method, TNT’s

percentage share o the balance sheet and income statement items are included

in TNT’s consolidated fnancial statements.

Functional currency and presentation currencyItems included in the fnancial statements o each o the group’s entities are

measured using the currency o the primary environment in which the entit y

operates (“the unctional currency”). The consolidated fnancial statements are

presented in euros, which is TNT’s unctional and presentation currency.

Foreign currency transactions and balancesForeign currency transactions are translated into the unctional currency using

the exchange rates prevailing at the date o the tr ansactions. Monetary assetsand liabilities in oreign currencies are translated to the unctional currency

using year-end exchange rates. Foreign exchange gains and losses resulting

rom the settlement o oreign currency transactions and balances and rom the

translation at year-end exchange rates are recognised in the income s tatement

except or qualiying cash ow hedges and qualiying net investment hedges that

are directly recognised in equit y.





chapter 6

Foreign operationsThe results and fnancial position o all group entities (none o which has the

currency o a hyperinationary economy) that have a unctional currency

dierent rom the presentation currency are translated into the presentation

currency as ollows:

assets and liabilities are translated at the closing rate, –

income and expenses are translated at average exchange rates, and –

the resulting exchange dierences based on the dierent ways o translation –

between the balance sheet and the income statement are recognised as a

separate component o equity (translation reserve).

Foreign exchange dierences arising rom the translation o the net investment

in oreign entities, and o borrowings and other currency instruments

designated as hedges o such investments are taken to the translation reserve.

When a oreign operation is sold, such exchange dierences are recognised in

the statement o income as part o the gain or loss on the sale.

Goodwill and air value adjustments arising on the acquisition o a oreign entity

are treated as assets and liabilities o the oreign entity and translated at the

closing rate.

Intangible assets

GoodwillGoodwill represents the excess o the cost o acquisition over the air value o

TNT’s share o the identifable net assets acquired and is recorded as goodwill.

Goodwill on acquisitions o subsidiaries and joint ventures is included in

intangible assets. Goodwill on acquisition o associates is included in investments

in associates. Gains and losses on disposal o an entity include the carrying

amount o goodwill relating to the entity sold.

Separately recognised goodwill arising on acquisitions is capitalised and subject

to an annual impairment review. Goodwill is carried at cost less accumulated

impairment losses.

Other intangible assetsCosts related to the development and installation o sotware or internal use

are capitalised at historical cost and amor tised over the estimated useul lie.

Apart rom sotware, other intangible assets mainly include customer lists,

assets under development, licences and concessions. Other intangibles acquired

in a business combination are recognised at air value at the acquisition date.

An asset is transerred to its respec tive intangible asset category at the momentit is ready or use and is amortised using the straight-line method over its

estimated useul lie. Other intangible assets are valued at the lower o historical

cost less amortisation and impairment.

Property, plant and equipmentProperty, plant and equipment is valued at historical cost using a component

approach, less depreciation and impairment losses.In addition to costs o

acquisition, the company also includes costs o bringing the asset to working

condition, handling and installation costs and the non-reundable purchase

taxes. Under the component approach, each component o an item o proper ty,

plant and equipment with a cost that is signifcant in relation to the total cost o

the item shall be depreciated separately.

Depreciation is calculated using the straight-line method based on the estimated

useul lie, taking into account any residual value. The assets’ residual values and

useul lives are reviewed, and adjusted i 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 uture economic

benefts associated with the item will ow to the company and the cost o the

item can be measured reliably.

Land is not depreciated. System sotware is capitalised and amortised as a

part o the tangible fxed asset or which it was acquired to operate, because the estimated useul lie is inextricably linked to the estimated useul lie o the

associated asset.

Leases o property, plant and equipment are classifed as fnance leases i the

company has substantially all the risks and rewards o ownership. Finance

leases are capitalised at the lease’s inception at the lower o the air value o the

leased property and the present value o the minimum lease payments. The

corresponding rental obligations, net o fnance charges, are included in long

term debt. Proper ty, plant and equipment acquired under fnance leases are

depreciated over the shorter o the asset’s useul lie and the lease term.

Impairment o goodwill, intangibles andproperty, plant and equipment

GoodwillGoodwill is not subject to amortisation but is tested or impairment annually

or whenever there is an indication that the asset might be impaired. For the

purposes o assessing impairment, assets are grouped at the lowest levels or

which there are separately identifable cash ows being the cash generating

units. I the recoverable value o the cash generating unit is less than the carr ying

amount o the cash generating unit, the impairment loss is allocated frst to

reduce the carrying amount o the goodwill allocated to the unit and to other

assets o the unit pro-r ata on the basis o the carr ying amount o each asset in

the unit. The recoverable amount is the higher o the air value less cost to sell

and value in use. In assessing the value in use, the estimated uture cash ows

are discounted to their present value using a pre-tax discount rate that reects

current market assessments o the time value o money and the asset specifc

risks. For the purpose o assessing impairment, corporate assets are allocated

to specifc cash generating units beore impairment testing. The allocation o

the corporate assets is based on the contribution o those assets to the u ture

cash ows o the cash generating unit under review.

Impairment losses recognised or goodwill are not reversed in a subsequentperiod.

Property, plant and equipmentand fnite lived intangible assetsAt each balance sheet date, the Group reviews the carrying amount o its

property plant and equipment and fnite lived intangible assets to determine

whether there is an indication that those assets have suered an impairment

loss. I any indication exists, the recoverable amount o the assets is estimated

in order to determine the extent, i any, o the impairment loss. An asset is

impaired i the recoverable amount is lower than the carrying value. The

recoverable amount is defned as the higher o an asset’s air value less costs to

sell and its value in use.



Annual report 2008

Financial statem

chapt

I the recoverable amount o an asset is estimated to be less than its carrying

amount, the carrying amount o the asset is reduced to its recoverable amount.

Any impairment loss is recognised immediately in the income statement.

Impairment losses recognised in prior periods shall be reversed only i, there

has been a change in the estimates used to determine the asset’s recoverable

amount since the last impairment loss was recognised. The recoverable amount

shall not exceed the carrying amount that would have been determined had no

impairment loss been recognised in prior years. A reversal o an impairment

loss is recognised immediately in the income statement.

Financial assets and liabilitiesTNT classifes fnancial assets and liabilities into the ollowing categories:

fnancial assets and liabilities at air value through proft or loss, loans and

receivables, held-to-maturity investments, available-or-sale fnancial assets and

fnancial liabilities measured at amortised cost. The classifcation depends on

the purpose or which the fnancial asset or liability were acquired. Management

determines the classifcation o TNT’s fnancial assets and liabilities at initial

recognition.

Financial assets and fnancial liabilities at air value through proft or loss include

derivatives and other assets and liabilities that are designated as such upon

initial recognition.

Financial assets and fnancial liabilities at air value through proft or loss are

initially recorded at air value net o transaction costs incurred and subsequently

re-measured at air value on the balance sheet. TNT designates certain

derivatives as either: hedges o the air value o recognised assets and liabilities

o a frm commitment (air value hedge), hedges o a particular risk associated

with a recognised asset or liability or a highly probable orecasted transaction

(cash ow hedge) or hedges o a net investment in a oreign operation (net

investment hedge).

I a derivative is designated as a cash ow or net investment hedge, changes in its

air value are considered to be eective and recorded in a separate component

in equity until the hedged item is recorded in income. Any portion o a change

in a derivative’s air value that is considered to be ineective, or is excluded

rom the measurement o eectiveness, is immediately recorded in income

statement.

TNT documents at the inception o the transaction the relationship between

hedging instruments and hedged items, as well as its risk management objective

and strategy or undertaking various hedge transactions. The company also

documents the assessment, both at hedge inception and on an ongoing basis,whether the derivatives that are used in hedging transactions are highly eective

in osett ing changes in air values or cash ows o hedged items .

Changes in the air value o derivatives that are designated and qualiy as air

value hedges are recorded in the income statement, together with any changes

in the air value o the hedged asset or liability that are attributable to the

hedged risk.

Amounts accumulated in equity are recycled in the income statement in the

periods when the hedged item will aect proft and loss (or example, when

the orecasted sale that is hedged takes place). However, when the orecasted

transaction that is hedged results in the recognition o a non-fnancial asset, the

gains and losses previously deerred in equity are transerred rom equity and

included in the initial measurement o the asset or liability.

When a hedging instrument expires or is sold, or when the hedge no longer

meets the criteria or hedge accounting, any cumulative gains or losses existing

in equity at that time, remain in equity until the orecasted transaction is

ultimately recognised in the income statement. When a orecasted transaction

is no longer expected to occur, the cumulative gain or loss that was reported in

equity is immediately transerred to the income statement.

Loans granted and receivables are non-derivative fnancial assets with fxed or

determinable payments that are not quoted in an active market and or which

TNT has no intention o trading. Loans and receivables are included in tradeand other receivables in the balance sheet, except or maturiti es greater than 12

months ater the balance sheet date. These are classifed as non-current assets.

Held-to-maturity investments are non-derivative fnancial assets with fxed

or determinable payments and fxed maturities where TNT has the positive

intention and ability to hold to maturity.

Available-or-sale fnancial assets are non-derivatives that are either designated

in this category or not classifed in any o the other categories above. They

are included in non-current assets unless management intends to dispose o

the investment within 12 months o the balance sheet date. Available-or-sale

fnancial assets are carried at air value.

Loans and receivables and held-to-maturity investments are carried at

amortised cost using the eective interest method. Unrealised gains and losses

arising rom changes in the air value o fnancial assets and liabilities classifed

as at air value through proft and loss are directly recorded in the income

statement.

Unrealised gains and losses arising rom changes in the air value o fnancial

assets classifed as available-or-sale are recognised in equity. When fnancial

assets classifed as available-or-sale are sold or impaired, the accumulated air

value adjustments are included in the consolidated statements o income as

gain or loss.

The air values o quoted investments are based on current bid prices. I the

market or a fnancial asset is not active (and or unlisted securities), TNT

establishes air value by using valuation techniques. These include the use

o recent arm’s length transactions, reerence to other instruments that are

substantially the same and discounted cash ow analysis refned to reect the

issuer’s specifc circumstances.

TNT assesses at each balance sheet date whether there is objective evidence that a fnancial asset or a group o fnancial asset s is impaired. In the case o equity

securities classifed as available-or-sale, a signifcant or prolonged decline in the

air value o the securit y below its cost is considered in determining whether the

securities are impaired. I any such evidence exists or available-or-sale fnancial

assets, the cumulative loss – measured as the dierence between the acquisition

cost and the current air value, less any impairment loss on that fnancial asset

previously recognised in income statement – is removed rom equity and

recognised in the income statement. Impairment losses on equity instruments

recognised in the income statement are not reversed through equity.





chapter 6

Financial liabilities measured at amortised cost are recognised initially at air

value net o transaction costs incurred and subsequently stated at amortised

cost; any dierence between the proceeds (net o transaction costs) and the

redemption value is recognised in the income statement over the period o the

fnancial liability using the eective interest method.

InventoryInventories o raw materials and fnished goods are valued at the lower

o historical cost or net realisable value less any provision required or

obsolescence. Historical cost is based on weighted average prices.

Accounts receivableAccounts receivable are recognised initially at air value and subsequently

measured at amortised cost using the e ective interest method, less allowance

or impairment. An allowance or impairment o accounts receivable is

established when there is objective evidence that the company will not be able

to collect all amounts due according to the original terms o the receivables . The

amount o the allowance is the dierence between the asset’s carrying amount

and the present value o estimated uture cash ows, discounted at the eective

interest rate. The amount o the loss is recognised in the income statement.

The reversal o the impairment loss is included in the income statement at the

same line as were the original expense had been recorded.

Cash and cash equivalentsCash and cash equivalents are carried in the balance sheet at air value. Cash and

cash equivalents include cash at hand, bank account balances, bills o exchange

and cheques (only those which can be cashed in the short term). All highly

liquid investments with an original maturity o three months or less at date o

purchase are considered to be cash equivalents. Bank overdrats are not net ted

o rom cash and cash equivalents.

Assets held or sale and discontinued operationsAsset s (or disposal groups) held or sale are classifed as assets held or sale and

stated at the lower o their carrying amount and air value less costs to sell i

their carrying amount is recovered principally through a sale transaction rather

than through continuing use. Assets held or sale are no longer amortised or

depreciated rom the time they are classifed as such.

Operations that represent a separate major line o business or geographical

area o operations, or that are part o a single coordinated plan to dispose

o a separate major line o business or geographical area o operations or is

a subsidiary acquired exclusively with a view to resale and either have been

disposed o or have been classifed as held or sale, are presented as discontinued

operations in TNT’s statements o income.

EquityOrdinary shares are classifed as equity. Incremental costs directly attributable

to the issue o new shares or options are shown in equity as a deduction, net o

tax, rom the proceeds.

Where any group company purchases TNT’s equity share capital (treasury

shares), the consideration paid, including any directly attributable incremental

costs (net o income taxes), is deducted rom equity until the shares are

cancelled, reissued or disposed o. Where such shares are subsequently sold or

reissued, any consideration received, net o any directly attributable incremental

transaction costs and the related income tax eects are included in equit y.

Incremental costs directly attribut able to the issue o new shares or options or

the acquisition o business combinations are included in the cost o acquisition

as part o the purchase consideration.

Provisions or pension liabilitiesThe obligation or all pension and other post-employment plans that qualiy

as defned beneft obligation is determined by calculating the present value o

the defned beneft obligation and deducting the air value o the plan assets.

TNT uses actuarial calculations (projected unit credit method) to measure

the obligations and the costs. For the calculations, actuarial assumptions aremade about demographic variables (such as employee turnover and mortality)

and fnancial variables (such as uture increases in salaries). The discount rate is

determined by reerence to market rates.

Cumulative actuarial gains and losses are recognised in the balance sheet. The

portion o the cumulative actuarial gains and losses that exceed the higher o

10% o the obligation or 10% o the air value o plan asse ts (corridor approach)

are recognised in the statement o income over the employees’ expected

average remaining service lives.

Past service costs, i any, are recognised on a straight-line basis over the

average vesting period o the amended pension or early retirement benef ts.

Certain past service costs may be recognised immediately i the benefts vest

immediately.

Gains or losses on the curtailment or set tlement o a defned beneft plan are

recognised at the date o the curtailment or settlement.

Pension costs or defned contribution plans are expensed in the statements o

income when incurred or due.

Other provisionsProvisions are recognised when there is a present obligation as a result o a past

event, it is probable that an outow o resources embodying economic benefts

will be required to settle the obligation and a reliable estimate can be made o

the amount o the obligation. Provisions are measured at the present value o

management’s best estimate o the expenditure required to settle the present

obligation at the balance sheet date. The discount rate used to determine the

present value reects current market assessments o the time value o money

and the risks specifc to the liability. The gross up o the provision ollowing

the discounting o the provision is recorded in the proft and loss statement as

interest expense.

Provisions are recorded or employee beneft obligations, restructuring,

onerous contracts and other obligations.

The provision or employee beneft obligations includes long-service leave

or sabbatical leave, jubilee or other long service beneft s, long term disability

benefts and, i they are not payable wholly within twelve months ater the

end o the period, proft sharing, bonuses and deerred compensation. The

expected costs o these beneft s are recognised over the period o employment.

Actuarial gains and losses and changes in actuarial assumptions, are charged or

credited to income in the period such gain or loss occur. Related service costs

are recognised immediately.



Annual report 2008

Financial statem

chapt

The provision recorded or restructuring largely relates to termination benefts.

Termination benefts are payable when employment is terminated beore

the normal retirement date, or whenever an employee accepts voluntary

redundancy in exchange or these benefts. TNT recognises termination

benefts when the company has committed to terminate the employment

o current employees according to a detailed ormal plan without possibility

o withdrawal or provide termination benefts as a result o an oer made to

encourage voluntary redundancy. Benefts alling due more than 12 months

ater balance sheet date are discounted to their present value.

Provisions or onerous contracts are recorded when the unavoidable costs

o meeting the obligation under the contract exceed the economic benefts

expected to arise rom that contract, t aking into account impairment o fxed

assets frst.

The provision or other obligations concerns mainly provisions or legal and

contractual obligations and received claims.

Trade accounts payableTrade accounts payable are recognised initially at air value and subsequently

measured at amortised cost using the eective interest method.

Income taxesThe amount o income tax included in the statements o income is determined

in accordance with the rules established by the taxation authorities, based on

which income taxes are payable or recoverable.

Deerred tax assets and liabilities, arising rom temporary dierences between

the nominal values o assets and liabilities and the fscal valuation o assets and

liabilities, are calculated using the tax rates expected to apply when they are

realised or settled. Deerred tax assets are recognised i it is probable that they

will be realised. Deerred ta x assets and liabilities where a legally enorceable

right to oset exists and within the same tax group are presented net in the

balance sheet.

Revenue recognitionRevenues are recognised when services are rendered, goods are delivered or

work is completed. Revenue is the gross inow o economic beneft s during the

current year arising in the course o the ordinary activities when those inows

result in increases in equity, other than increases relating to contributions rom

equity participants.

Revenues o delivered goods and services are recognised when: the company has transerred to the buyer the signifcant risks and rewards o –

ownership o the goods;

the company retains neither continuing managerial involvement to the –

degree usually associated with ownership nor eective control o the goods

sold;

the amounts o revenue are measured reliably; –

it is probable that the economic benefts associated with the transaction will –

ow to the company;

the costs to be incurred in respect o the transaction can be measured –

reliably; and

the stage o completion o the transaction at the balance sheet date can be –

measured reliably.

Revenue is measured at the air value o the consideration o received amounts

or receivable amounts.

Amounts received in advance are recorded as accrued liabilities until services

are rendered to customers or goods are delivered.

Net SalesNet sales represent the revenues rom t he delivery o goods and services to

third parties less discounts, credit notes and taxes levied on sales. Accumulated

experience is used to estimate and provide or the discounts and returns.

Other Operating RevenuesOther operating revenues relate to the sale o goods and rendering o ser vices

not related to TNT’s normal trading activities and mainly include rental income

o temporarily leased-out property, passenger/ charter revenues, aircrat

maintenance and engineering income and custom clearance income.

Other incomeOther income includes net gains or losses rom the sale o property, plant and

equipment and other gains and losses.

Prot-sharing and bonus plansThe company recognises a liability and an expense or cash settled bonuses

and proft-sharing, based on a ormula that takes into consideration the proft

attributable to its shareholders ater certain adjustments.

Share based paymentsTNT has equity-settled, share based compensation plans. Share based

payment transactions are transactions in which TNT receives benefts rom

its employees in consideration or TNT’s equity instruments. The air value o

the share based transactions is recognised as an expense (part o the employee

costs) and a corresponding increase in equity over the vesting period. The

air value o share based payments is calculated using the Monte Carlo model.

The equity instruments granted do not vest until the employee completes a

specifed period o service.

The amount to be expensed over the vesting period is determined by reerence

to the air value o the options granted, excluding the impact o non-market

conditions. These non-market conditions are included in assumptions about

the number o options that are expected to vest. At each balance sheet date,

TNT revises its estimates o the number o options that are expected to vest.

The impact o the revision to original estimates is recognised in the income

statement with a corresponding adjustment to equity.

Interest income and expenseInterest income and expense are recognised on a time-proportion basis using

the eective interest method. Interest income compromises interest income

on borrowing, changes in the air value o fnancial assets at air value through

proft or loss, oreign currency gains and gains on hedged items.

Interest expenses comprise interest expense on borrowings, unwinding o

the discount on provisions, oreign currency losses, changes in the air value o

fnancial assets at air value through proft or loss, impairment losses recognised

on fnancial assets and losses on hedged i tems.

All borrowing costs are recognised in proft or loss using the eective interest

method.





chapter 6

GrantsGrants are recognised initially as deerred income when there is reasonable

assurance that they will be received and TNT has complied with the conditions

associated with the grant. Grants that compensate TNT or expenses incurred

are recognised in the income statement on a systematic basis in the same

periods in which the expenses are recognised. Grants that compensate TNT

or the cost o an asset are deducted rom the historical value o the assets

and as such recognised in the income statement on a systematic basis over the

useul lie o the asset.

Operating leasesLeases where the lessor retains substantially all the risks and rewards o

ownership are classifed as operating leases. Payments made under operating

leases (net o any incentives received rom the lessor) are charged to the income

statement on a straight-line basis over the period o the lease.

Dividend distributionDividend distribution to TNT’s shareholders is recognised as a liability in the

fnancial statements in the year in which the dividends are approved by the

shareholders.

Consolidated cash fow statementsThe cash ow statements have been prepared using the indirect method.

Cash ows in oreign currencies have been translated at average exchange

rates. Exchange rate dierences aecting cash items are shown separately in

the cash ow statements. Receipts and payments with respect to taxation on

profts are included in the cash ow rom operating activities. Interest payments

are included in cash ows rom operating activities while interest receipts

are included in cash ows rom investing activities. The cost o acquisition

o subsidiaries associates and investments, insoar as it was paid or in cash,

is included in cash ows rom investing activities. Acquisitions o subsidiaries

are presented net o cash balances acquired. Cash ows rom derivatives are

recognised in the cash ow statements in the same category as those o the

hedged item.

Operating segment inormationTNT recognises three operating segments being Express, Mail and Other

networks. Operating segments are reported in a manner consistent with the

internal reporting as provided to the chie operating decision makers. The

members o the Board o Management o TNT are identifed as chie operating

decision makers.

Critical accounting estimatesand judgements in applying

TNT’s accounting policiesThe preparation o TNT’s fnancial statements requires management to

make estimates and assumptions that aect the reported amounts o assets

and liabilities, revenues and expenses, and related disclosure o contingent

assets and liabilities at the date o TNT’s fnancial statements. Estimates and

judgements are continually evaluated and are based on historical experience

and other actors, including expectations o uture events that are believed to

be reasonable under the circumstances.

TNT makes estimates and assumptions concerning the uture. The resulting

accounting estimates will, by defnition, seldom equal the related actual results.

The estimates and assumptions that have a signifcant risk o causing a material

adjustment to the carrying amounts o assets and liabilities within the next

fnancial year are discussed below.

Business combinationsTNT accounts or all its business combinations under the purchase accounting

method. The cost o an acquired company is assigned to the assets purchased

and the liabilities assumed on the basis o their air values at the date o acquisition. The determination o air values o assets and liabilities acquired

requires TNT to make es timates and use valuation techniques when market

value is not readily available. Any excess o purchase price over the air value o

the assets acquired is allocated to goodwill.

Impairment o assetsIn determining impairments o intangible assets including goodwill, tangible fxed

assets and fnancial fxed assets , management must make signifcant judgements

and estimates to determine whether the cash ows generated by those assets

are less than their carr ying value. Determining cash ows requires the use o

judgements and estimates that have been included in TNT’s st rategic plans and

long-range orecasts. The data necessary or the execution o the impairment

tests are based on management estimates o uture cash ows, which require

estimating revenue growth rates and proft margins.

Depreciation and amortisation o tangible and intangible xed assetsTangible and intangible fxed assets, except or goodwill, are depreciated or

amortised at historical cost using a straight-line method based on the estimated

useul lie, taken into account any residual value. The asset’s residual value and

useul lie are based on TNT’s best estimates and reviewed, and adjusted i

required, at each balance sheet date.

Impairment o receivablesThe risk o uncollectability o accounts receivable is primarily estimated based

on prior experience with, and the past due status o, doubtul debtors, while

large accounts are assessed individually based on actors that include ability to

pay, bankruptcy and payment history. In addition, debtors in cer tain countries

are subject to a higher collectability risk, which is taken into account when

assessing the overall risk o uncollectability. Should the outcome dier rom

the assumptions and estimates, revisions to the estimated valuation allowances

would be required.

Employee benetsPost-employment benefts represent obligations that will be settled in the

uture and require assumptions to project beneft obligations. Post-employment

beneft accounting is intended to reect the recognition o uture beneft costs

over the employee’s approximate service period, based on the terms o the

plans and the investment and unding decisions made. The accounting requires

the company to make assumptions regarding variables such as discount rate,

rate o compensation increase, return on assets, and u ture healthcare costs.

TNT consults with outside actuaries regarding these assumptions at least

annually. Changes in these key assumptions can have a signifcant impact on the

defned beneft obligations, unding requirements and pension cost incurred.

For a discussion o the current unded status and a sensitivity analysis with

respect to pension plan assumptions, see note 10.





chapter 6

Statement o changes in intangible assets

Goodwill SotwareOther

intangibles Total

Amortisation percentage 10%-35% 0%-35%

Historical cost 2,086 402 58 2,546Accumulated 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 transers/reclassifcations 22 (22)

Amortisation and impairments (56) (17) (73)

Exchange rate dierences (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)


Changes in 2008

Additions 7 49 25 81

Disposals (1) (1)

(De)consolidation 2 2

Internal transers/reclassifcations 3 (1) (2) 0

Amortisation (66) (17) (83)

Impairments (8) (8)

Exchange rate dierences (30) (12) (5) (47)

Total changes (21) (38) 3 (56)

Historical cost 2,305 469 141 2,915

Accumulated amortisation and impairments (498) (309) (45) (852)



Notes to the consolidated balance sheets1 Intangible assets: 2,063 million (2007: 2,119)

Goodwill including those generated rom the acquisition o TNT and GD

Express Worldwide is allocated to the group’s cash generating units (“CGU’s”)

and tested or impairment. In 2008, no signifcant acquisitions have occurred.

The decrease o goodwill is mainly due to oreign exchange dierences resulti ng

rom acquisitions in the past outside the eurozone. The CGU’s correspond to

an operation in a particular country or region and the nature o the services that

are provided being: Mail, Express or Other networks. Compared to 2007, the

number and nature o the CGU’s has remained largely unchanged.

Total goodwill balance as per 31 December 2008 amounts to €1,807 million

o which TNT has allocated €1,241 million to the Express Europe CGU, €211

million to the combined European Mail Networ ks CGU’s, €269 million to other

Express CGU’s, €49 million to Other networks CGU and €37 million to other

Mail CGU’s. The allocation o the goodwill to the CGU’s is comparable with

2007.

The recoverable amount is the higher o the value in use and air value less cost

to sell. In order to determ ine the recoverable amount TNT applied the air value

less cost to sell approach. Fair value less cost to sell represents the best estimate

o the amount the Group would receive i it sold the CGU. The air value was

estimated on basis o the discounted present value o uture cash ows.

For mature markets, the estimated uture net cash ows are based on a fve

year orecast and business plans. The applied growth rate does not exceed

the long-term average growth rate o the relating operation and market. For

markets which are considered to be non-mature no steady state has been



Annual report 2008

Financial statem

chapt

achieved to date. As a result a ten-years orecast has been applied to estimate

the uture net cash ows. These cash projections are extr apolated by applying

a zero growth rate to perpetuit y. The cash ow projections based on fnancial

budgets have been approved by management.

TNT determined the budgeted gross margin based on past perormance

and its expec tations or market development. The weighted average growth

rates used are consistent with the orecasts included in industry report s. The

discount rates used in the CGU’s valuat ions vary around 9% to 10% (pre-tax) to

reect specifc risks relating to the relevant divisions.

Key assumptions used to determine the recoverable values o all CGU’s are the

ollowing:

maturity o the underlying market, market share, volume development in –

order to determine the revenue mix and growth rate,

level o capital expenditure which may aect by the urther roll out o the –

network,

level o operating income largely impacted by revenue and cost development –

taken into the nature o the underlying costs and potential economies o

scale, and

discount rate to be applied ollowing the nature o the underlying cash ows –

and risk associated with those risks.

Management has carried out an impairment test and concluded that the

recoverable amount is higher than the carrying amount. TNT determined the

budgeted operating income based on past perormance and its expec tations

or market development. However, due to current market circumstances and

relating uncertainty a sensitivity analysis has been applied or all CGU’s. This

sensitivity analysis included the individual impact o the ollowing items which

are considered to be the most critical when determining the recoverable value:

Increase o the discount actor by 1% and 2%; –

Increase o capital expenditure o 5% per year; –

Decrea se o operating income o 15% per year. –

The sensitivity analysis showed that the surplus above book value or all CGU’s

is sufcient.

The sotware balance includes internally generated sotware with a book

value o €132 million at 31 December 2008 (2007: 153). O the additions in

sotware, €37 million related to sel produced sotware and €12 million related

to purchased sotware.

The impairment charge o €8 million (see note 19) mainly relates to intangibles

o Postkantoren B.V. ollowing the decision o TNT and ING to concentrating

on their own sales outlets or handling postal and banking business. As a result,

TNT will transer the currently combined services to own TNT Post acilities.

Other intangible assets relate to customer lists o €57 million (2007: 76)

and sotware under construction o €39 million (2007: 17). The estimated

amortisation expenses or sotware and other intangibles or the subsequent

fve year s are 2009: €61 million, 2010: €60 million, 2011: €44 million, 2012: €28

million, 2013: €20 million and ater 2013: €43 million. TNT does not conduct

signifcant research and development and thereore does not incur research

and development costs.





chapter 6

o 20%. Depending on the type o aircrat, the depreciation term varies rom

10 to 25 years. Spare par ts are depreciated to their e stimated residual value

on a straight line basis over the remaining estimated useul lie o the associated

aircrat or engine type. All 29 owned aircrat (2007: 29) are operated by the

Express business o which 9 aircrat have been transerred to assets held or

sale with a total value o €11 million.

The impairment o aircrat o €37 million is based on the air value less cost to

sell, based among others on ex ternal pricing inormation. This impairment has

been triggered by a signifcant decrease in air volumes as rom 2008 ollowed

by decommissioning o nine aircrat. The impairment charges have been

recognised in the statement o income, see note 19.

2 Property, plant and equipment: 1,634 million (2007: 1,785)

Statement o changes in property, plant and equipmentLand andbuildings

Plant andequipment Aircrat Other

Constructionin progress Total

Depreciation percentage 0%-10% 4%-33% 4%-10% 7%-25% 0%

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 dierences (19) (7) (7) (2) (35)

Depreciation (62) (100) (32) (77) (271)

Impairments (5) (5)

Transers to assets held or sale (2) (2)

Transers and reclassifcations 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)


Changes in 2008

Capital expenditure 37 61 2 58 131 289

Disposals (6) (2) (1) (9)

Exchange rate dierences (53) (30) (6) (10) (3) (102)

Depreciation (65) (94) (33) (79) (271)

Impairments (37) (37)

Transers to assets held or sale (10) (11) (21)

Transers and reclassifcations 43 52 1 32 (128) 0

Total changes (54) (13) (84) 0 0 (151)

Historical cost 1,421 1,035 456 643 39 3,594

Accumulated depreciation and impairments (628) (699) (153) (480) 0 (1,960)



Land and buildings mainly relate to depots, hubs and other production acilities.

Land and buildings o €31 million (2007: 44) are pledged as security to third

parties in Express in Germany. TNT does not hold reehold ofce buildings or

long term investments and or long term rental income purposes. The rental

income is based upon incidental rental contracts with third par ties or buildings

which are temporarily not in use by TNT or based upon contracts which are

supportive to the primary business activities o TNT.

Plant and equipment mainly relate to investments in vehicles and sorting

machinery.

Aircrat and (spare) engines are depreciated on a straight-line basis over the

shorter o the asset’s useul lie and the lease term to estimated residual values



Annual report 2008

Financial statem

chapt

Finance leases

Land andbuildings

Plant andequ ipment Air cr a t Other

Total2008

Total2007

Total 33 18 202 2 255 257

Express 16 17 202 2 237 251

Mail 17 1 18 6

(in € millions)

Included in land and buildings under fnancial leases are lease hold rights and

ground rent. The book value o the lease hold rights and ground rent in mail is

€17 million (2007: 4), comprising a historical cost o €24 million (2007: 7), with

accumulated depreciation o €7 million (2007: 3). The book value o the lease

Statement o changes in fnancial fxed assetsOther fnancial fxed assets

Investments inassociates

Other loansreceivable

Deerred taxassets

Financial fxedassets at air value

Other prepaymentsand accrued income Total

Balance at 31 December 2006 58 7 211 17 21 314

Changes in 2007Acquisitions/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) 0 (3)

Other changes 1 9 10

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


Changes in 2008

Acquisitions/additions15 1 40 4 60Disposals/decreases (32) (1) (33)

Transfers to assets held for sale 0

(De)consolidation 0

Withdrawals/repayments (1) (1) (4) (6)

Exchange rate differences (6) (6)

Other changes (33) (33)

Total changes (19) 0 2 (1) 0 (18)


(in € millions)

3 Financial xed assets: 307 million (2007: 325)

Finance leases included in the property, plant and equipment balance as at 31

December 2008 are:

hold rights and ground rent in Express is €16 million (2007: 18), comprising

a historical cost o €25 million (2007: 25) with accumulated depreciation o

€9 million (2007: 7). Aircrat leases amounting to €202 million mainly relates

to two Boeing 747 reighters. One o these reighters has been sub-leased to

Emirates.

Lease hold and ground rent s expiring with in 1 year amount to €1 million (2007:

1), lease hold and ground rents between 1 and 5 years amount to €5 million

(2007: 6), lease hold and ground rents between 5 and 20 years amount to €18

million (2007: 13) and lease hold and ground rents between 20 and 40 yearsamount to €9 million (2007: 1), lease hold and ground rents more than 40

years amount to €0 million (2007: 1). There are no lea se hold and ground rents

contracts with indefnite terms. Lease hold rights and ground rent or land and

buildings are mainly in Belgium or €9 million (2007: 10), in the Netherlands or

€16 million (2007: 4) and in Fr ance or €6 million (2007: 7).

There are no material temporarily idle property, plant and equipment at 31

December 2008 (2007: 0).





chapter 6

Investments in associatesAs per 31 December 2008, the investments in associates amounted to €64

million. The goodwill balance included in investments in associates at 31

December 2008 is €5 million (2007: 3).

TNT’s most signifcant investment in an associate is Logispring Investment

Fund Holding B.V., which sole activity is to invest in incubator unds. Included

in the other changes o -€33 million (2007: 1) is an amount o €30 million or

the impairments o underlying investments o Logispring triggered by the

deteriorated economic environment or such activities. The air values arederived rom the most recent valuation report s, extr apolated using relevant

benchmarks and indices.

Deerred tax assetsDeerred tax assets are urther explained in note 22.

Financial assets at air valueFinancial assets at air value include TNT’s 3.8% equity stake in CEVA

Investments Ltd. (ormerly known as Louis Topco Limited), or an amount o

€11 million (2007: 11), which TNT obtained as part o the sale o its logistics

division as at 4 November 2006.

4 Inventory: 24 million (2007: 30)

Specifcation o inventory

At 31 December

2008 2007

Raw materials and supplies 10 10

Finished goods 14 20

Total 24 30

(in € millions)

Total inventory o €24 million (2007: 30) is valued at historical cost or an

amount o €28 million (2007: 35) and is stated net o provisions or obsolete

items amounting to €4 million (2007: 5). There are inventories carried at net

realisable value or an amount o €1 million (2007: 1) and no inventories are

pledged as secur ity or liabiliti es as at 31 December 2008 . In 2008 and 2007, no

material write os re lating to inventories occurred. The balance o inventories

that is expec ted to be recovered ater 12 months is nil (2007: 1).

5

(Trade) accounts receivable:1,574 million (2007: 1,656)

The air value o the accounts receivable approximates its carrying value. Other

accounts receivables mainly include receivables rom insurance companies,

deposits and various other items. The balance o accounts receivable that

is expected to be recovered ater 12 months is €25 million (2007: 11). The

maximum exposure to credit risk at the reporting date is the carrying value o

each class o receivables mentioned above. The top ten tr ade receivables o

TNT account or 7% o the outstanding trade receivables as per 31 December

2008. TNT does not hold collateral as security or the outs tanding balances.

The concentration o the accounts receivable per customer is limited. The

concentration o the trade accounts receivable portolio over the dierentregions can be summarised as ollows: the Netherlands €274 million (2007:

256), other Europe €865 million (2007: 965), Asia €127 million (2007: 118) and

Americas and rest o the world €104 million (2007: 113). For the non-trade

accounts receivables no allowance or impairment is r equired.

As o 31 December 2008, the total trade accounts receivable amounted to

€1,445 million (2007: 1,514), o which €660 million (2007: 828) was past due

date but not individually impaired. The standard payment terms or both

our express and mail business are around 14 days. The total provision or

impairment amounts to €75 million (2007: 62) o which €43 million (2007: 35)

relates to trade accounts receivable that were individually impaired or the

notional amount. The remainder o the provision relates to a collective loss

component established or groups o similar trade accounts receivable balances

in respect to losses that have been incurred bu t not yet identifed as such or

trade accounts receivable. This collective loss component is largely based on

the ageing o the trade receivables and reviewed periodically.

The ageing analysis o the trade accounts receivable past due but not individually

impaired is presented below:

Ageing analyses o trade accounts receivableAt 31 December

2008 2007

Up to 1 month 444 574

2-3 months 141 174

3-6 months 44 45

Over 6 months 31 35

Total 660 828

(in € millions)

The movements in the provision or impairment o trade accounts receivablesare as ollows:

Statement o changes provision or impairmentAt 31 December

2008 2007

Balance at 1 January 62 61

Provided or during fnancial year 41 18

Receivables written o during year as uncollectable (27) (13)

Unused amounts reversed (1) (4)

Balance at 31 December 75 62

(in € millions)

Specifcation o trade accounts receivableAt 31 December

2008 2007

Trade accounts receivable - total 1,445 1,514

Allowance or impairment (75) (62)

Trade accounts receivable 1,370 1,452

Vat receivable 42 34

Other accounts receivable 162 170

Accounts receivable 204 204

(in € millions)



Annual report 2008

Financial statem

chapt

6 Prepayments and accrued income:298 million (2007: 236)Prepayments and accrued income include amounts paid in advance to cover

costs that will be charged against income in uture years and net revenues not

yet invoiced. At 31 December 2008, prepayments amounted to €78 million

(2007: 79). The balance o prepayments and accrued income that is expected

to be recovered ater 12 months is €1 million (2007: 4).

Prepayments and accrued income also include outstanding short term oreign

exchange orward contracts or an amount o €41 million (2007: 4). Theair value o these fnancial instruments has been calculated at the relevant

(orward) market rates at 31 December 2008. The notional principal amount

o the outstanding oreign exchange orward contracts is €837 million at 31

December 2008 (2007: 461). At 31 December 2007 also two outstanding

orward starting interest rate swaps were included or an amount o €1 million

and a notional value o €400 million.

7 Cash and cash equivalents: 497 million (2007: 295)Cash and cash equivalents comprise cash at bank and in hand o €135 million

(2007: 169) and short term bank deposits o €362 million (2007: 126). The

eective interest rate during 2008 on shor t term bank deposits was 4% (2007:

4%) and the average outstanding amount was €189 million (2007: 77). The

individual deposits have an average maturity o 1.6 days (2007: 1.6). Included in

cash and cash equivalents is €26 million (2007: 41) o restricted cash. The air

value o cash and cash equivalents approximates the carrying value.

8 Assets held or sale: 25 million (2007: 10)The assets held or sale as at 31 December 2008 amount to €25 million (2007:

10) and relates to the decommissioning o 9 aircrat within the Express division

or an amount o €11 and to bui ldings held or sale o €14 million (2007: 10) o

which €9 million within Mail and €5 million within Express.

The proft rom discontinued operations in 2007 related to the completion o

the sale o its reight management business. This transaction resulted in a book

gain o €206 million which has been reported as income rom discontinued

operations in 2007. The operating resul t o the discontinued reigh t management

operations or the period 1 January 2007 up to and including 4 February 2007

amounted to zero.

9 Equity: 1,757 million (2007: 1,951)Equity consists o equity attributable to the equity holders o TNT N.V. o

€1,733 million (2007: 1,931) and minority interest o €24 million (2007: 20).

Equity attributable to the holders o TNT N.V. consists o the ollowing items:

Issued share capitalIssued share capital amounted to €173 million at 31 December 2008 (2007:

182). The number o authorised , issued and outstanding shares by class o share

is as ollows:

Authorised, issued and outstanding sharesAt 31 December

2008 2007

Authorised 1,600,000,000 1,600,000,000

Ordinary shares 800,000,000 800,000,000

Preerence B 800,000,000 800,000,000

Issued and outstanding 360,021,821 379,224,255

Ordinary shares 360,021,821 379,224,255

o which held by thecompany to cover share plans 1,059,931 1,716,060

o which held by thecompany or cancellation 0 6,977,275

Preerence B 0 0

Authorised share capitalBy deed o 27 April 2007 the articles o association were amended. As o that

date the company’s authorised share capital amounts to €768 million, divided

into 800,000,000 ordinary shares and 800,000,000 preerence shares B o

€0.48 nominal value each.

Form o sharesThe ordinary shares are in bearer or in registered orm. Ordinary shares in

bearer orm are represented by a global note held by the Dutch clearing system

Euroclear Netherlands (ormerly known as NECIGEF) and are transerable

through Euroclear Netherlands’ book entry system. ADRs represent ordinary

shares in bearer orm represented by the note held by Euroclear Netherlands.

Ordinary shares in registered orm are transerred by means o a deed o

transer and TNT’s written acknowledgement o the transer. TNT does not

have share certifcates or ordinary shares represented by the global note. The

preerence shares B are in registered orm.

Repurchase o shares to cover share plansIn 2008, the company purchased no ordinary shares (2007: 0) to cover its

obligations under the exis ting management option plans and share grants . At 31

December 2008 the total number o shares held or this purpose was 1,059,931

(2007: 1,716,060). TNT shares held by the company are not entitled to receive

dividends nor have voting rights.

Repurchase o shares / reduction o the issued

share capital by cancellation o sharesThe €500 million share buyback programme as announced on 30 July 2007, has

been completed in 2008 ollowing the purchase o 12,225,159 ordinary shares

by TNT in 2008 (2007: 6,977,275) or an amount o €306 million.

On 11 April 2008 the annual general meeting o shareholders resolved to cancel

a total number o 11,034,904 o ordinary shares. The cancellation o these shares

became eective as o 24 June 2008. In addition, 8,167,530 shares have been

cancelled on 22 September 2008. Both cancellations relate to the €500 million

share buyback programme as announced on 30 July 2007. The company held

no ordinary shares or cancellation at 31 December 2008 (2007: 6,977,275).

Thereore, in 2008, the total number o issued and outstanding ordinary shares

decreased by 19,202,434 shares. At a nominal value o €0.48 per share, the

cancellation equals an amount o €9.2 million.





chapter 6

Foundation Protection TNT and preerence shares BStichting Bescherming TNT (Foundation Protection TNT or the Foundation)

was ormed to care or TNT’s interests, the enterprises connected with TNT

and all interested parties, such as shareholders and employees, by, among

other things, preventing as much as possible inuences which would threaten

TNT’s continuity, independence and identity contrary to such interests. The

Foundation is an independent legal entity and is not owned or controlled by any

other legal person.

TNT’s articles o association provide or protective preerence shares B thatcan be issued to the Foundation to serve these interest s. The preerence shares

B have a nominal value o €0.48 and have the same voting rights as TNT’s

ordinary shares. There are currently no preerence shares B issued, although

the Foundation has a call option to acquire a number o preerence shares B not

exceeding the total issued amount o shares minus one and minus any shares

already issued to the Foundation.

The exercise price with respect to the call option is the nominal value o €0.48

per preerence share B, although upon exercise only €0.12 per preerence

share B is required to be paid. The additional €0.36 per preerence share B is

due at such time as TNT makes a call or payment by resolution o its Board o

Management, which resolution is subject to the approval o the Supervisory

Board. The Foundation has credit acilities in place to enable it to pay the

exercise price.

TNT and the Foundation have entered into the call option agreement to

prevent, delay or complicate unsolicited inuence o shareholders, including an

unsolicited take-over or concentration o power. The issue o preerence shares

B enables TNT to consider its position in the then-existing circumstances. The

preerence shares B will be outstanding no longer than str ictly necessary. Once

the reason or the placing o the preerence shares B no longer exists, TNT

shall propose to the general meeting o shareholders to cancel the preerence

shares B entirely as a class.

Ater six months have expired since the acquisition o preerence shares B, the

Foundation may require TNT to convene a general meeting o shareholders

to discuss cancellation o the preerence shares B. However, should the

Foundation within this period o six months receive a demand or repayment

under the credit acilities reerred to above, it may also require TNT to convene

said meeting. In accordance with TNT’s current articles o association a general

meeting o shareholders shall be convened by TNT ultimately twelve months

ater the frst date o issuance o any preerence shares B to the Foundation or

the frst time. The agenda or that meeting shall include a resolution relating to the repurchase or cancellation o the preerence shares B.

TNT has granted to the Foundat ion the right to fle an application or an inquiry

into the policy and conduct o business o TNT with the Enterprise Chamber o

the Amsterdam Court o Appeal (Ondernemingskamer). TNT believes that t his

may be a useul option in the period beore the issuance o preerence shares B,

without causing a dilution o the rights o other shareholders at that st age.

The members o the board o the Foundation are R. Pieterse (chairman),

J.H.M. Lindenbergh, W. van Vonno and M.P. Nieuwe Weme. All members o

the Board o the Foundation are independent rom TNT. This means that the

Foundation is an independent legal entit y in the sense reerred to in section 5:71

paragraph 1 sub c o the Netherlands Financial Markets Supervision Act (Wet

op het fnancieel toezicht).

Additional paid in capitalAdditional paid in capital o €876 million (2007: 982) is exempt or Dutch

tax purposes to the ex tent that this has been paid in by shareholders o the

Company. The decrease in additional paid in capi tal o €106 million is due to the

repurchase o shares o €306 million in 2008. The remainder o €200 million

has been deducted rom the other reserves.

Translation reserveIn 2008 the translation reserve decreased rom -€82 million in 2007 to -€212

million in 2008. An amount o -€129 million (2007: -81) is the movement inexchange dierences on converting oreign subsidiaries o TNT N.V. into

euros. These dierences are charged or credited to the translation reserve,

net o taxation . In 2008, an amount o -€1 million was relea sed rom equity and

charged to income.

The translation reserve is a legal reserve, which cannot be distributed to the

equity holders o the company.

Hedging reserveMovements on cash ow hedges amounted to -€13 million (2007:-1) resulting

rom the air value movement on the €568/£450 million cross currency swaps

(2007: 0) and the carrying value o the US dollar $262 million (2007: $273) o

interest rate swaps, net o taxes. The €568/£450 million cross currency has

been entered into to mitigate oreign currency exposure on the £450 million

Eurobond which has been issued in 2008. The US dollar interest rate swaps

have been entered into to mitigate the cash ow interest rate risk relating ot

the Boeing 747 ERF fnancial lease contracts. Please reer to note 30 Financial

instruments.

The net ca sh payments relating to the unwinding o these swaps will be recycled

rom equity to the income statement based on the duration o the underlying

hedged items. During 2008, €400 million (2007: 600) and $0 million (2007:

$154 million) o orward starting swaps were unwound with a €2 million

positive e ect in the income statement. In 2008, €0 million o air value (2007:1)

adjustment has been recycled to the income statement due to ineective

hedging. For urther inormation on the interest rate swaps, see note 30.

The hedge reserve is a legal reserve, which cannot be distributed to the equity

holder s o the company.

Other reservesAs per 31 December the other reserves are €497 million (2007: 0). The

appropriation o net income rom 2007 which is added to the other reservesin 2008 amounts to €669 million (2007: 378). In 2008, the other reserves

decreased by €191 million. This is a net balance o € -200 million ollowing the

repurchase o shares (2007: -423) and the cancellation o shares o €9 million.

The remainder o €106 million rom the total repurchase share o €306 million

has been deducted rom additional paid in capital. In 2008, TNT increased

its other reserves representing the air value o share based payments to an

amount o €16 million (2007: 14).

The other movement in the other reserves o €3 million (2007: 31) includes the

proceeds obtained rom the share grants o 2008 and 2007 and exercise rights

o option plans o prior years.

Retained earningsThe proft or 2008 has been calculated as the 2008 net income o TNT N.V.

and all its subsidiaries. The 2008 unappropriated component is €434 million



Annual report 2008

Financial statem

chapt

(2007: 871), containing the net proft o €556 million (2007: 986) and the paid

interim dividend 2008 o €122 million (2007: 115). The Board o Management

has determined to add €434 million (2007: 669) to other reserves and to put

€0 million (2007: 202) as fnal dividend at the disposal o the general meet ing o

shareholders.

10 Pension assets: 726 million (2007: 594) andprovisions or pension liabilities: 360 million (2007: 437)TNT operates a number o pension plans around the world. Most o TNT’s

non-Dutch pension plans are defned contribution plans. For TNT’s non-Dutchemployees, the company also operates other post-employment beneft plans

and defned beneft plans, or which the liabilities are separately covered by

private insurers and oreign pension unds. The majority o the Dutch pension

plans are defned beneft plans and consist o a main plan, transition plan and

other pension plans.

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

unded in “Stichting Pensioenonds TNT” (main und), covers the employees

who are subject to TNT’s collective labour agreement and sta with a personal

labour agreement who joined the company as rom 2007 in the Netherlands.

The majority o all TNT’s Dutch employees are subject to the collective labour

agreement. The plan covers around 96,00 0 participants including approximately

16,000 pensioners and around 36,000 ormer employees. By Dutch law the

plan is carried out by an independent legal entity, Stichting Pensioenonds TNT,

that is not owned or controlled by any other legal entit y and that alls under the

supervision o the Nederlandsche Bank (DNB) and the Authoriteit Financiële

Markten (AFM).

The transitional pension plan consist o the early retirement scheme and

additional arrangements which have been agreed between the company and

the employees ollowing the revised fscal regulations applying to Dutch pension

plans in 2006.

In the main plan only the employer contributes to the und. The level o

contribution is based upon actuarial recommendations. The total contribution

to the main pension und amounted to €100 million (2007: 94) and is estimated

to be €240 million in 2009. This estimate includes the expected additional

employer contribution as a result o the unding shortall as described below.

The contribution or the transitional plans amounted to €104 million (2007:

103) and are es timated at €98 mil lion or 2009.

Derivatives o equity and debt instruments (e.g. swaps) may be used by the

Pensionund to realise changes in investment portolio, to hedge againstunavourable market developments or to adjust the matching o assets and

liabilities. During 2008 interest rate swaps were used to increase the interest

risk hedge strategically rom around 60% to around 75%.

The turmoil on the fnancial markets during 2008 had a signifcant impact on the

investment portolio o the main und and the air value o i ts pension liabilities.

Per 31 December 2008, the main defned beneft plan in the Netherlands

had a coverage ratio o 93%, as calculated under the requirements o DNB,

a more than signifcant drop rom the 141% as per 31 December 2007. As

this coverage ratio has dropped below the minimum unding requirement o

105%, Stichting Pensioenonds TNT is required to prepare a recovery planwhich aims to increase fnancial buers over time. By letter o 18 November

2008, DNB has ex tended the deadline to submit a recovery plan or practically

all pension unds to 1 April 2009 at the latest. Given het unding shortall in

the main plan, both a short-term recovery and a long-term recovery plan are

required. Stichting Pensioenonds TNT is currently in the process o preparing

the recovery plans. The short term recovery plan will have to outline how the

105% minimum unding level will be restored within a three year timerame

as currently prescribed by Dutch Pension Law. Such a plan will outline one or

more o the ollowing measures: increase o employer contributions, reduction

o uture beneft increases, a change in asset portolio and or a reduc tion o

pension entitlements. The long-term recovery plan will outline how by one or a

combination o the measures described above the unding level will reach at or

beyond the required level o around 120%, subject to the amount o risk o the

investment portolio, within fthteen years as currently prescribed by Du tch

Pension Law.

The main und runs an actively managed investment port olio. The main und

uses asset and liability management studies that generate uture scenarios

to determine its optimal asset mix. During 2008, the dynamic weight o

equity investments decreased to 37.5%, the dynamic weight o fxed interest

investments increased to 44.5% and the weight o real estate and alternative

investments decreased to 18.0%. The plan assets may rom time to time include

investment in TNT’s own fnancial instruments through indirect holdings by

mutual unds. However, these indirect holdings are an immaterial share o the

total plan assets. The plan assets do not include property occupied by or other

assets used by TNT.

The pension defned beneft obligation o TNT’s main plan and transitional plan

covers approximatel y 94% o the group pension obligation or post-employment

beneft s and the plan assets cover approximately 93% o the group pension plan

assets.

Asset mix o main pension planAt 31 December Actual mix Strategic mix

2008 2007 2009 2008

Equities 37.5% 42.1% 42% 42%

Fixed interest and ination linked Bonds 44.5% 38.1% 40% 40%

Real estate and alternative investment 18.0% 19.8% 18% 18%

Total 100.0% 100.0% 100% 100%





chapter 6

Historical returns o main pension plan

2008

averagesince planinception

Equities -41.4% 6.3%

Fixed interest and ination linked Bonds 0.8% 6.7%

Real estate and alternative investment -17.1% 6.6%

Swaps 8.4% 2.4%

Total weighted average -14.2% 6.8%

The return on the group plan assets was -14.2 % (2007: 2.4%). The average

return o the group assets since inception o the plan is 6.8% which is based on

the actual return o the investments in combination with their relative weight

per year. This weight can vary based on the actual mix .

Pension costs recognised in the statements o incomeThe valuation o TNT’s pension and the determination o its pension cost are

based on key assumptions which include: employee turnover, mortality rates

and retirement ages, discount rates, expected long term returns on plan assets,

pension increases and uture wage increases, which are updated on an annual

basis at the beginning o each fnancial year. Actual circumst ances may vary rom

these assumptions giving rise to a dierent pension liability at year-end. The

dierence between the projected pension liability based on the assumptions

and the actual pension liability at year-end are reected in the balance sheet

and part o the actuarial gains and losses. I the cumulative actuarial gains and

losses exceed the corridor, this will be amortised over the expected remaining

average service lie and reected as an additional proft or expense in TNT’sstatement o income in the next year.

In 2008, TNT’s expense or post-employment beneft plans was €24 million

(2007: 45). Total cash contributions or pensions in 2008 amounted to €224

million (2007: 212) o which €204 or the Dutch Plans (including transitional

plan) and are estimated to amount to approximately €365 million in 2009 o

which €338 million or the Dutch Plans.

Statement o changes in net pension asset/(liability)

Balance at1 January 2008

Employer pension expense

Contributionsand Other

Balance at

31 December 2008

Pension assets/(liabilities) 207 (20) 224 411

o which main pension plan in the Netherlands 536 14 100 650

o which transitional plan in the Netherlands (387) (31) 104 (314)

o which other pension plans 58 (3) 20 78

Other post-employment beneft plans (50) (4) 9 (45)

Total post-employment beneft plans 157 (24) 233 366

(in € millions)



Annual report 2008

Financial statem

chapt

The total net post employment beneft plans o €366 million as per 31

December 2008 (2007: 157) consist o a pension asset o €726 million (2007:

594) and a pension liabili ty o €360 million (2007: 437).

Pension disclosures

2008 2007

Change in beneft obligation

Beneft obligation at beginning o year (4,805) (5,373)

Service costs (113) (139)Interest costs (275) (255)

Amendments/oreign currency eects 10 2

Curtailments/settlements 1

Actuarial (loss)/gain 754 762

Benefts paid 214 197

Beneft obligation at end o year (4,215) (4,805)

Change in plan assets

Fair value o plan assets at beginning o year 4,787 4,668

Actual return on plan assets (683) 104

Contributions 224 212

Amendments/oreign currency eects (10) 0

Benefts paid (214) (197)

Fair value o plan assets at end o year 4,104 4,787

Funded status as per 31 December

Funded status (111) (18)

Unrecognised net actuarial loss 516 217

Unrecognised prior service costs 7 8

Pension liabilities 412 207

Other employee beneft plans (46) (50)

Net pension asset/(liability) 366 157

Components o employer pension expense

Service costs (113) (139)

Interest costs (275) (255)

Expected return on plan assets 377 373

Amortisation o actuarial loss (5) (20)

Curtailment gain 1

Other costs (4) (1)

Employer pension expense (20) (41)

Other post employment beneft plan expenses (4) (4)

Total post employment beneft expenses (24) (45)

Weighted average assumptions as at 31 December

Discount rate 6.1% 5.7%

Expected return on plan assets 7.1% 7.9%

Rate o compensation increase 2.0% 2.0%

Rate o beneft increase 1.2% 2.0%


The unded status o TNT’s pension plans at 31 December 2008 and 2007 and

the employer pension expense or 2008 and 2007 is presented in the table

below.





chapter 6

TNT’s pension expense is aected by the discount rate used to measure

pension obligations and the expected long-term rate o return on plan assets.

Management reviews these and other assumptions every year. Measurement

date or TNT’s post-employment benefts is 31 December. Changes in

assumptions may occur as a result o economic and market conditions. The

impact o changes on the annual pension expense can be ound in the table

‘sensitivity o assumptions’ hereater. I actual results dier rom those assumed,

this will generate actuarial gains or losses. These are amortised over the

remaining average service lives o employees i they exceed the 10%-corridor.

The discount rate is based on the long-term yield on high quality corporate

bonds or which management has assessed available AA y ields and the historical

spreads between AA and A yields including a correction or the duration-

mismatch based on the yield curve used by Dutch pension unds as published

by DNB. The duration o the pension liabilities is around 16 years. The yield on

these bonds is corrected or this duration-mismatch.

Management considers various actors to determine the expected return

on plan assets. The expected retur n is based on the current long-term rates

o return on bonds and applies to these rates a suitable risk premium or the

dierent asset components. The premium is based on the plan’s asset mix,

historical market returns and current market expectation.

Returns are linked to the strategic objec tive o the Stichting Pensioenonds TNT,

as annually reported in the Asset Liability Management study o this main und

and is calculated as the geometric mean over fteen years rom two-thousand

uture scenarios taking into account the relevant s tandard deviations o, and

correlations between, the various asset categories, as derived rom historical

evidence. This main und controls 93% o the Group plan assets. Ultimately the

long-term objec tive is to protec t the assets rom erosion o purchase power, and

to provide long-term growth o capital without excessive exposure to risk. The

duration o the plan liabilities determines the investment strategy. The assets

are managed by external investment managers. Active management strategies

are utilised in an eort to realize investment returns in excess o market indices.

This programme provides a reasonable expectation that returns can be

achieved that exceed indexed unds. However or 2009 Stichting Pensioenonds

TNT has decided to reduce such strategies and in particular has stopped the

Global Tactical Asset Allocation overlay strategy. The main und establishes the

investment policy and strategy, including the selection o investment managers,

setting long term strategic targets and monitoring. The str ategic asset mix is a

target and not a limitation. The und may approve component s o the asset mix

above or below targeted range. The und may decide to rebalance or change

the asset mix periodically.

Assumptions regarding uture mortality are based on advice, published statistics

and experience per country. The majority o the defned beneft obligation

relates to participants in the Netherlands. In the Netherlands, the average lie

expectancy o men ater retiring at the age o 65 is 18.1 years (2007: 18.0).

The equivalent expectancy or women is 21.3 years (2007: 21.0). The applied

mortality rates derived rom the mor tality table “GBM/GBV 2007-2012 with

age corrections -1/-1 (male/emale)”.

Funded status defned beneft plansThe table below reconcil es the opening and closing balances o the present value

o the defned beneft obligation and the air value o plan assets or the other

defned beneft pension plans. Included in the provision or pension liabilities are

other employee benefts or the ununded defned beneft Trattamento di Fine

Rappor to (“TFR”) in Italy o €46 million (2007: 50).

The amounts recognised in the balance sheet are determined as ollows:

Balance sheet calculationsAt 31 December

2008 2007

Present value o unded beneft obligations (3,842) (4,175)

Fair value o plan assets 4,104 4,787

(Un)Funded status 262 612

Present value o ununded beneft obligations (373) (630)

Unrecognised liability 523 225

Other employee beneft plans (46) (50)

Net pension asset/(liability) 366 157

o which included in pension assets 726 594

o which included in provisions or pension

liabilities (360) (437)

(in € millions)

The table below shows the sensitivity o the employer pension expense to

deviations in assumptions.

Sensitivity o assumptions%-change

in assumptionschange in employer

pension expense

Employer pension expense 2008 (20)

Discount rate +0.5% 19

Expected return on plan assets +0.5% 31

Rate o compensation increase +0.5% (55)

Rate o beneft increase +0.5% (53)

Employer pension expense 2008 (20)

Discount rate -0.5% (22)

Expected return on plan assets -0.5% (31)

Rate o compensation increase -0.5% 48Rate o beneft increase -0.5% 46


The table below shows the defned beneft obligation, air value o plan assets

and experience adjustments thereon or the current annual period and previous

our annual periods. The experience adjustment is the dierence between the

expected and actual position at the end o the year. The experience adjustment

o the defned beneft obligation can not be reliably determined or the period

2004-2005.



Annual report 2008

Financial statem

chapt

Status o undingAt 31 December

2008 2007 2006 2005 2004

Funded and Ununded Defned beneft obligation (4,215) (4,805) (5,373) (5,398) (4,887)

Experience adjustment gain/(loss) 0.7% 0.9% -0.4%

Fair value o plan assets 4,104 4,787 4,668 4,216 3,693

Experience adjustment gain/(loss) -20.5% -5.4% 1.2% 4.7% 0.4%

(Un)Funded status (111) (18) (705) (1,182) (1,194)


Expected beneft payments

Year amounts

2009 206

2010 227

2011 238

2012 223

2013 207

(in € millions)

The table below shows the expected uture benefts per year or pension

unds related to TNT’s plans or the coming fve years. The benefts include all

Amounts expensed in the consolidated statements o income related to defned

contribu tion plans were €36 million (2007: 36).

11 Other provisions: 402 million (2007: 362)

Statement o changes in other provisionsOther employee

beneftobl igat ions Restructuring

Claims andindemnities Other Total

Balance at 31 December 2007 60 141 89 72 362

o which included in other provisions (non-current) 55 86 12 47 200

o which included in other provisions (current) 5 55 77 25 162

Changes in 2008

Additions 8 102 21 37 168 Withdrawals (5) (47) (25) (29) (106)

Exchange rate dierences (3) (2) (3) (6) (14)

(De)consolidation (1) (1)

Interest 6 6

Reclassifcation (8) (1) 9 0

Other/releases (10) (4) 1 (13)

Total changes (1) 41 (12) 12 40

Balance at 31 December 2008 59 182 77 84 402

o which included in other provisions (non-current) 45 112 7 48 212

o which included in other provisions (current) 14 70 70 36 190

(in € millions)

expected payments by the unds to the pensioners and by TNT or the Dutch

transitional plan.





chapter 6

Other employee benefts consist o provisions related to jubilee payments

€38 million (2007: 34), long-service benefts €5 million (2007: 13) and other

employee benefts o €16 million (2007: 13). Short term employee benefts,

such as salaries, prof t sharing and bonuses are discussed in note 18.

As per 31 December 2008, the restructuring provision amounted to €182

million o which €154 million (2007: 140) relates to rest ructuring project s within

the Mail division and €28 million (2007: 1) within the Express division. The

additions to the restructuring provision over 2008 were €102 million which

€74 million or Mail and €28 million or Express. The additions or Mail relatemainly to the estimated fnancial compensation ollowing the agreed social plan

or the restruc turing o the joint venture Postkantoren B.V. (€67 million) as both

TNT and ING decided to concentrate on their own sales outlets or handling

postal and banking business. The addition o €28 million within the Express

division concerns the restructuring plans in European countries which involves

approximately 1,000 employees.

The withdrawals rom the restructuring provision o €47 million (2007: 13)

relates mainly to payments or an amount o €34 million to employees which

have applied or collective mobility agreements within the Mail division.

Following these agreements restructuring provisions have been established

to compensate employees which have been made redundant due to the

implementation o efciency projects which aim to standardise the collection,

preparation and delivery o mail.

In 2008 2,051 employees have been made redundant o which 1,367 within the

mail division (2007: 121) and 684 within the express d ivision (2007: 55).

This restructuring provision within the Mail division is discounted at 6% (2007:

7%) as this provision is expected to be utilised during the period 2009-2012.

The relating interest o €6 million has been recorded as part o the fnancial

expenses, please reer to note 21.The restructuring provision within the Express

division is expected to be utilised during the per iod 2009.

Provisions or claims and indemnities include provisions or claims rom third parties with respect to TNT’s ordinary business activities, as well as

indemnities and disputes related to the sale o TNT ’s discontinued operations.

More detailed inormation relating to these provisions is not provided since

such inormation could prejudice the company’s position with respect to these

indemnities and disputes.

Other provisions consist mainly o onerous contracts, dilapidation provisions,

non employee related restructuring provisions and guarantees provided to

third parties. The additions o €37 million relate to onerous contracts and other

sett lement o €15 million or Postkantoren and provisions or guarantees o €15

million and €5 million relating to other costs with respect to the restructuring

o express. The withdrawals o €29 million concern mainly settlements o €23

million ollowing the downsizing and transerring o TNT’s operations in the UK

parcel business in 2007.

The es timated ut ilisation in 2009 is €190 million, in 2010 €87 million, in 2011 €26

million and in 2012 €81 million and beyond €18 million.

12 Long term debt: 1,845 million (2007: 1,294)

Carrying amounts and air value o long term debtAt 31 December 2008 2007

CarryingAmount

Fair value

CarryingAmount

Fair value

Euro Bonds 1,489 1,379 1,019 1,078

Finance leases 214 185 223 220

Other loans 7 11 23 23

Interest rate swaps 135 135 29 29

Total long term debt 1,845 1,710 1,294 1,350

(in € millions)

In the table above, the air value o long term interest bearing debt, net o its

current portion, has been determined by calculating the discounted value

o the uture cash ows (redemption and interest) using the inter-bank zero

coupon curve. The carrying amounts o the current portion o long term debt

approximate their air value.

The table below sets or th the carrying amounts o interest-bearing long term

liabilities (including the current portion) during each o the ollowing fve years

and thereater:



Annual report 2008

Financial statem

chapt

For underlying details o the fnancial instruments, see note 29 and 30.

Other current liabilitiesAt 31 December

2008 2007

Short term bank debt 36 46

Other short term debt 360 745

Total current borrowings 396 791

Taxes and social security contributions 245 204

Expenses to be paid 37 35

Other 212 158

Total 890 1,188

(in € millions)

13 Other current liabilit ies: 890 million (2007: 1,188)

Total current borrowingsOther short term debt includes Commercial Paper o €222 million (2007: 0),

short term bank acilities o €122 million (2007: 82) and the current portion o

outst anding lease liabi lities o €16 million (2007: 18). There are no balances o 31

December 2008 that are expected to be settled ater 12 months (2007: 0). At

31 December 2007, other short term debt also included the 5.125% Eurobond

maturing in 2008 or an amount o €646 million.

Other Other includes short term oreign exchange orward contracts with a air value

o €43 million (2007: €9) and a nominal value o €766 million (2007: 642).

Notes to the consolidated

statements o income15 Net sales: 10,983 million (2007: 10,885)The net sales o Mail, Express and other networks relate to the trading activities

o these reporting segments, arising rom rendering services. Net sales allocated

by geographical area in the country or region in which the entity records sales

is detailed in note 34.

16 Other operating revenues: 169 million (2007: 132)Other operating revenues relate to the sale o goods and rendering o ser vices

not related to TNT’s normal trading activities and mainly include passenger/

charter revenues €111 million (2007: 75), customs clearance/ administration

revenue €23 million (2007: 33) and rental income o temporarily leased-out

proper ty €3 million (2007: 4).

Total borrowingsEuro

BondsFinance

leasesOther loans

Interest rateswaps

Short termbank debt Total

2009 16 344 36 396

2010 19 2 21

2011 18 1 19

2012 14 1 9 24

2013 13 1 14

Thereater 1,489 150 2 126 1,767Total borrowings 1,489 230 351 135 36 2,241

o which included in long term debt 1,489 214 7 135 1,845

o which included in other current liabilities 16 344 36 396

(in € millions)

14 Accrued current liabilities: 1,131 million (2007: 1,147)

Accrued current liabilitiesAt 31 December

2008 2007

Amounts received in advance 145 120

Expenses to be paid 640 673

Vacation days/vacation payments 188 173

Terminal dues 67 68

Other accrued current liabilities 91 113

Total 1,131 1,147

(in € millions)

Amounts received in advance include €52 million (2007: 50) or stamps which

were sold but not yet used.

An amount o €47 million is expected to be sett led ater 12 months (2007: 51).





chapter 6

Labour orce2008 2007

Employees1

Express 75,537 75,032Mail 86,052 84,929

Other networks 1,385 1,385

Non-allocated 271 236

Total at year end 163,245 161,582

Employees o joint ventures2 4,424 4,621

External agency sta at year end 29,919 38,639

Full-time equivalents (FTEs)1

Express 70,667 70,271

Mail 42,431 42,777

Other networks 1,143 1,182

Non-allocated 252 229

Total year average 114,493 114,459

FTEs o joint ventures2 3,858 4,000

1 – Including temporary employees on our payroll.

2 – These numbers represent all employees and FTEs in the joint ventures.

At the end o 2008, 4,424 people (2007: 4,621) were employed by joint ventures,

o whom 2,350 (2007: 2,674) were on the payroll o Dutch companies , primarily

Postkantoren B.V. and 2,074 (2007: 1,947) were on the payroll o companies

outside the Netherlands.

Apart rom the headcount o employees the labour orce is also expressed in

ull-time equivalents (FTE’s) based on the hours worked divided by the local

standard. In 2008 the average number o FTE’s in the Mail division was 42,431.

The expansion o European mail networks mainly in Germany and the UK

resulted in an increase o around 700 FTE’s which was oset by the decrease in

mail Netherlands o around 1,400 FTE’s resulting rom efciency initiatives.

17 Other income: 35 million (2007: 75)Other income in 2008 mainly includes net proceeds rom the sale o property,

plant and equipment or €30 million (2007: 62) and other income o €5 million

(2007: 13).

18 Salaries, pensions and social securitycontributions: 3,617 million (2007: 3,608)

Salaries and social security contributionsYear ended at 31 December

2008 2007

Salaries 3,050 3,071

Share based payments 16 13

Pension charges:

Defned beneft plans 24 45

Defned contribution plans 36 36

Social security charges 491 443

Total 3,617 3,608

(in € millions)

The headcount and average number o FTE’s in the Express division as at 31

December 2008 remained stable.

Remuneration o members o the Supervisory BoardFor the year 2008, the accrued remuneration o the current members o the

Supervisory Board amounted to €573,250 (2007: 564,214). The remuneration

o the individual members o the Supervisory Board is set out in the table

below:

Supervisory Board compensationBase

compensationOther

payments1

Totalremuneration

Mr R.J.N. Abrahamsen 45,000 18,000 63,000

Mr R. Dahan2 18,750 3,000 21,750

Mr V. Halberstadt 45,000 18,000 63,000

Ms M.E. Harris 45,000 6,000 51,000

Mr J.H.M. Hommen 60,000 5,500 65,500

Ms G. Kampouri Monnas 45,000 6,000 51,000

Mr R. King 45,000 4,500 49,500

Mr P.C. Klaver 3 32,750 13,000 45,750

Mr W. Kok 45,000 10,000 55,000

Mr S. Levy 45,000 8,000 53,000

Mr G.J. Ruizendaal3 32,750 3,000 35,750

Mr R.W.H. Stomberg4 14,000 5,000 19,000

Total 473,250 100,000 573,250(in €)1 – Payments relating to number o Supervisory Board committee meetings attended

2 – R. Dahan resigned on 1 June 20083 – Appointed on 11 April 20084 – R.W.H. Stomberg resigned on 11 April 2008

No options or shares were granted to members o the Supervisory Board and

none o the members o the Super visory Board accrued any pension rights with

the company.

Remuneration o members o the Board o ManagementIn 2008 the total remuneration o the Board o Management consisted o:

base salary –

other periodic paid compensation –

variable compensation: –

accrued short term incentive – accrued long term incentive –

pension –

In the paragraphs below the 2008 values o each o these remuneration

elements will be reported per member o the Board o Management.

Total remunerationIn 2008, the remuneration (calculated in accordance with International Financial

Reporting Standards as adopted by the EU), including pension and social

security contributions, o the current and the ormer members o the Board o

Management amounted to €7,901,020 (2007: 9,198,005).

The remuneration o the individual members o the Board o Management is

set out in the table below:



Annual report 2008

Financial statem

chapt

Base salary

Base salary or the members o the Board o Management has been increased

in 2008 by 2% as decided by the Supervisory Board on advice o the

Remuneration Committee, eective rom 1 January 2008. The 2% increase is

determined by reerence to the average increase based on collective labour

agreement developments in base salaries in major countries where TNT is

carrying business.

Other periodic paid compensation

The other periodic paid compensation includes company costs related to

tax and social security, company car and other costs. It also includes salary

allowances made as compensation or the change in pension system as rom

Remuneration Board o Management

Basesalary

Other periodic paid

compensation

Accruedshort term

incentive

Accrued or long termincentive

Pensionrelated costs

Total2008

Total2007

Peter Bakker 918,000 159,998 684,268 485,125 86,083 2,333,474 2,713,469

Henk van Dalen 612,000 525,459 361,052 212,617 254,816 1,965,944 2,327,858

Harry Koorstra 612,000 142,302 506,124 248,304 84,315 1,593,045 1,770,434

Marie-Christine Lombard 612,000 501,958 259,906 353,173 281,520 2,008,557 2,386,244

Total 2,754,000 1,329,717 1,811,350 1,299,219 706,734 7,901,020 9,198,005

(in €)

Total var iable compensation Board o ManagementAccrued or short

term incentiveAccrued or long

term incentiveTotal variablecompensation

Peter Bakker 684,268 485,125 1,169,393

Henk van Dalen 361,052 212,617 573,669

Harry Koorstra 506,124 248,304 754,428

Marie-Christine Lombard 259,906 353,173 613,079

Total 1,811,350 1,299,219 3,110,569

(in €, except percentages)

Accrued short term incentive

The accrued short term incentive consists o the accrued bonuses or the

perormance o the year reported, paid in cash in the next year and the costs

relating to the bonus/matching share plan.

Bonus accrual or 2008 perormanceSince 2002, TNT accounts or bonus payments on the basis o the accrued

bonuses or the perormance o the year reported. In 2008, an amount o

€2,025,000 (2007: €1,953,000) was paid to the members o the Board o

Management or perormance over 2007.

In the table below the amount o €1,560,141 reects the accrued bonuses or

perormance over 2008, which will be paid in 2009.

2006 onwards. In the other paid compensation o Henk van Dalen (employed

as per 1 April 2006) the third yearl y instalment (out o our) o €325,000 o the

total compensation o €1,300,000 or the loss o long term incentive rights at

his ormer employer has been included. For Marie-Christine Lombard other

periodic paid compensation includes French social taxes and French security

contributions, calculated on the ull salary package i.e. base salary, bonus and

perormance shares.

Variable compensation

In the table below the total variable compensation in 2008 to the members o

the Board o Management is shown:





chapter 6

Bonus/matching share plan

As o 2008, the member s o the Board o Management are no longer eligible

to participate in the bonus/matching plan. The amount o €251,209 reects the

accrued costs in 2008 or the rights on matching shares that were granted in

2007, 2006 and 2005.

Under the bonus/matching plan, o the net bonus amount received an amount

equal to 25% o the gross bonus was used by the Board members to purchase

own TNT shares (bonus shares). Upon such purchase, a right on matching

shares was granted. The number o bonus shares involved is calculated by

dividing the amount invested by the share price on the day o grant. The day

o grant is the day ollowing the announcement o the frst quarter results. I

at least 50% o the bonus shares is retained or a period o three years and

provided continued employment, the right will vest and the company will match

Bonus-related matching rights Board o Management1

Number o matching rights on shares

Year Outstanding

1 Jan 2008Vested

during 2008Foreited

during 2008Outstanding31 Dec 2008

Remaining years incontractual lie

Peter Bakker 2005 8,211 8,211

2006 4,159 4,159 0.3

2007 5,213 5,213 1.3

Henk van Dalen 2007 2,919 2,919 1.3

Harry Koorstra 2005 5,474 5,474

2006 3,043 3,043 0.3

2007 3,476 3,476 1.3Marie-Christine Lombard 2005 4,562 4,562

2006 3,043 3,043 0.3

2007 3,476 3,476 1.3

Total 43,576 18,247 25,329

1 – As o 2008 the members o the Board o Management are no longer eligible to receive matching shares.

the number o shares on a one-to-one basis. In compliance with the Dutch

corporate governance code, the members o the Board o Management may

not sell their matching shares beore the earlier o fve years rom the date

o grant or the end o the employment, although any sale o shares or the

purpose o using the proceeds to pay or the tax relating to the grant o these

shares is exempted. These matching shares are held in a trust by TNT’s share

administrator.

All members o the Board o Management par ticipated in the scheme or the

bonus earned during their membership o the Board o Management, up until

2008.

Their current matching entitlement is set out in the ollowing table.

In 2008 the average price on vesting or matching shares or the members o the

Board o Management was €25.41.

Accrued short term incentive Board o ManagementAccruedor 2008

perormanceas % o

base pay

Accrued or matching

shares1

Accrued orshort term

incentive

Peter Bakker 587,795 64% 96,473 684,268

Henk van Dalen 336,784 55% 24,268 361,052

Harry Koorstra 439,722 72% 66,402 506,124

Marie-Christine Lombard 195,840 32% 64,066 259,906

Total 1,560,141 251,209 1,811,350

(in €, except percentages)1 – Includes costs or matching shares granted in 2005, 2006 and 2007. As o 2008 the members o the Board o Management are no longer eligible to receive matching shares.

The 2008 accrued short term incentive amounts or the members o the Board

o Management are accrued as set out below:



Annual report 2008

Financial statem

chapt

The costs are determined by multiplying the number o granted per ormance

shares with the air value o such shares on the date o grant (calculated by

using the Monte Carlo model) and by taking into account statistical evidence o

non-market conditions, which costs then subsequently are amortised over the

vesting period.

Vesting o the long term incentive

The vesting o the per ormance shares depends on the company’s perormance

on total shareholder return. TNT’s relative total shareholder return over the

period rom 28 April 2008 through 27 April 2011 governs the perormance

share grant or 2008. For the 2007 grant that period is rom 4 May 2007 through

Pro orma vesting per year end according to TSR perormance schedulesPerormance shares

Year Vesting % o

base allocationVesting as i per

31 Dec 2008

Peter Bakker 2006 25.2% 6,733

2007 2.5% 621

2008 29.5% 7,331Henk van Dalen 2006 25.2% 3,367

2007 2.5% 325

2008 29.5% 3,837

Harry Koorstra 2006 25.2% 3,367

2007 2.5% 325

2008 29.5% 3,837

Marie-Christine Lombard 2006 25.2% 7,567

2007 2.5% 325

2008 29.5% 3,837

Total 41,472

3 May 2010 and or the 2006 grant it is rom 4 May 2006 through 3 May 2009.

In compliance with the Dutch corporate governance code, the members o the

Board o Management may not sell their perormance shares beore the earlier

o fve years rom the date o grant or the end o the employment, although any

sale o shares or the purpose o using the proceeds to pay or the tax relating to

the grant o these shares is exempted. These perormance shares are held in a

trust by TNT’s share administrator.

Based on the total shareholder return vesting percentages, the next table

shows the pro orma vesting o the unvested perormance shares, as i the

perormance period ended at 31 December 2008.

Accrued long term incentive Board o Management

Costs in2008 rom

perormanceshares granted

in 2005

Costs in2008 rom


in 2006

Costs in2008 rom


in 2007

Costs in2008 rom


in 2008

Accrued orlong termincentive

Peter Bakker 71,374 168,117 178,569 67,065 485,125

Henk van Dalen 84,064 93,455 35,098 212,617

Harry Koorstra 35,687 84,064 93,455 35,098 248,304

Marie-Christine Lombard 35,687 188,933 93,455 35,098 353,173

Total 142,748 525,178 458,934 172,359 1,299,219

(in €)

Accrued long term incentive

Costs o the long term incentive

The maximum numbers o per ormance shares that can vest are disclosed in this

report and amount to 150% o base allocation or perormance shares granted

in 2008 and 2007, and to 120% o base allocation or perormance shares

granted in 2006. In the table below, the total costs o the rights on per ormance

shares granted to the members o the Board o Management are shown:





chapter 6

Long term incentive/perormance share plan

The table below summarises the status o the rights awarded under the

perormance share plan to the members o the Board o Management.

Rights on perormance shares Board o ManagementNumber o rights on perormance shares

Year Outstanding

1 Jan 2008Granted during

2008Vested

during 2008Foreited


Remaining yearsin contractual lie

Peter Bakker 2005 29,094 29,094

2006 32,062 32,062 0.3

2007 37,275 37,275 1.3

2008 37,275 37,275 2.3

Henk van Dalen 2006 16,032 16,032 0.3

2007 19,508 19,508 1.3

2008 19,508 19,508 2.3

Harry Koorstra 2005 14,547 14,547

2006 16,032 16,032 0.3

2007 19,508 19,508 1.3

2008 19,508 19,508 2.3

Marie-Christine Lombard 2005 14,547 14,547

2006 36,032 36,032 0.5

2007 19,508 19,508 1.3

2008 19,508 19,508 2.3

Total 254,145 95,799 58,188 291,756

In 2008 the average price on vesting or perormance shares or the members

o the Board o Management was €25.41.

Long term incentive/share option plan

The table below summarises the status o the outstanding options (no relating

costs in 2008) to acquire a number o TNT ordinary shares granted to the

Board o Management.

Options Board o Management

Number o options

Exerciseprice in €Year

Outstanding1 Jan 2008

Exercisedduring 2008

Foreitedduring2008

Outstanding31 Dec 2008

Share price onexercise date


Marie-Christine Lombard 2004 30,000 30,000 18.44 3.3

Total 30,000 30,000

PensionThe pension costs consist o the service costs or the year. Peter Bakker, Harry

Koorstra and Henk van Dalen are participants in a defned beneft scheme,

which provides an annual beneft o 70% o pensionable salary, assuming

35 years o service. Marie-Christine Lombard participates in a defned

contribution pension scheme. The pensionable age o all member s o the Board

o Management is 65 years.

Included in the pension costs or Henk van Dalen is the actuarial calculated

annual instalment in accordance with the employment agreement o Henk van

Dalen that an amount o €1,350,00 0 will be made available to be contributed by

the company in our equal annual instalments. This will only become payable to

the Stichting Ondernemingspensioenonds TNT under the condition that he is

still employed by the company on the payment dates.



Annual report 2008

Financial statem

chapt

Senior Management

Perormance share plan senior management

The performance share plan is an equity-settled scheme with annual grants.

Participants will be granted a conditional right over a maximum number o

TNT shares. The number o shares comprised in the share award reects the

position that the participant holds and management’s assessment o their uture

contribution to the company.

Participants will become owner o the share ater a period o three years(vesting period). The plan includes market based vesting conditions such that

the number o shares is dependent on TNT’s Total Shareholder Return (TSR)

perormance relative to certain other stock indices. These conditions are

included in the calculat ion o the air value at the grant date.

Rights on perormance shares managementNumber o rights on perormance shares

Year Outstanding

1 Jan 2008Granted

during 2008Vested

during 2008Foreited



Management 2005 446,005 431,057 14,948

2006 532,145 9,842 41,169 481,134 0.3

2007 1,043,204 2,560 85,640 955,004 1.3

2008 1,424,815 118 28,974 1,395,723 2.3

Total 2,021,354 1,424,815 443,577 170,731 2,831,861

In 2008 the average price on vesting or perormance shares or the management

was €25.16.

Option plan senior management

In 2005 the option plan was replaced by the perormance share plan. Final

option awards occurred in 2004.

Statements o changes o outs tanding options

The table below also includes the outs tanding options o the members o the

Board o Management and senior management. All options granted entitle t he

holder to the allotment o ordinary shares when they are exercised and are

equity settled.

Perormance shares were granted in April 2008 to 824 TNT managers –

at a air value o €13.00 each. These grants were part o the policy to

annually grant rights on per ormance shares to eligible members o senior

management rom 2005 onwards.

Rights on perormance shares will vest and shares comprising these rights –

will be released ater the third anniversary o the grant.

The right on per ormance shares oreits upon termination o employment –

prior to vesting. However, the participant retains the right to be compensated

when he/she leaves the company or certain reasons (retirement, certainreorganisations, disability or death).

The total number o rights on perormance shares or management granted in

2008 is stated below.

Statement o changes o outstanding options

Number o options

Year Outstanding

1 Jan 2008

Exercisedduring2008

Foreitedduring2008


Exerciseprice in €

Share price onexercise date


Board o Management 2004 30,000 30,000 18.44 3.3

Management 2003 79,584 10,925 68,659 13.85 24.54 2.1

2003 3,000 3,000 14.51 2.4

2004 341,029 33,678 307,351 18.44 24.48 3.3

Total 453,613 44,603 409,010





chapter 6

Bonus matching rights or ManagementNumber o matching rights on shares

Year Outstanding

1 Jan 2008Granted during

2008

Vestedor oreitedduring 2008


Remaining years incontractual lie

Management 2005 81,226 81,226

2006 62,337 3,196 59,141 0.32007 73,328 3,548 69,780 1.3

2008 103,558 1,067 102,491 2.3

Total 216,891 103,558 89,037 231,412

In 2008 the average price on vesting or matching shares or the management

was €25.33.

Bonus/matching plan or senior management

Members o a selected group o managers may on a voluntary basis participate

in the bonus/matching plan. In such case, they are paid 100% o their bonus in

cash and can conver t 25% as a grant o TNT shares with an associated matching

right in 2008 (103,558), 2007 (75,498), 2006 (67,107), 2005 (121,345), 2004

(107,710) and in 2003 (54,405) i at least 50% o the shares are kept or three

years. The company sees the bonus/matching plan as part o the remuneration

package or the members o its top management, and it is particularly aimed at

urther aligning their interests with the interests o the shareholders. Grants are

made in accordance with the bonus/matching plan, which has been approved by

the Supervisory Board.

The signifcant aspects o the plan are:

bonus shares are purchased rom the participant’s net income using 25% o –

the gross bonus amount and bonus shares are delivered upon the grant o

the right on matching shares,

the number o bonus shares is calculated by dividing 25% o an individual’s –

gross annual bonus relating to the preceding fnancial year by the share price

on the Euronext Amsterdam on the date the grant is made (2008: €25.00/

share),

the rights on matching shares are granted or zero costs and the number o –

shares is equal to the number o bonus shares,

the matching shares are delivered three years ater the delivery o the bonus –

shares. One matching share is delivered or each bonus share that has been

retained or three years,

or each bonus share that is sold within three years, the associated right to –

one matching share lapses. I more than 50% o the bonus shares are sold

within three years, the entire right to matching shares lapses with immediate

eect,

where a participant leaves the company or certain reasons (retirement, –

certain reorganisations, disability or death) the right on matching shares will

vest immediately and he/she can exercise his/her right pro rata, and

a participant loses the right to exercise his/her right on matching shares when –

he/she leaves the company or reasons other than those mentioned above.

The exercise o the rights on matching shares is subject to the TNT rules

concerning inside inormation that apply to TNT’s company. All awards under

this plan are equity settled.

The table below summarises the status o the number o outstanding rights on

matching shares granted to senior managers in the current TNT group:

Historic overview outstanding options2008 2007

Number o options

Weighted averageexercise price

(in €)Number o

options

Weighted averageexercise price

(in €)

Balance at beginning o year 453,613 17.61 1,663,242 18.08

Exercised (44,603) 24.49 (1,167,849) 32.27

Foreited (41,780) 21.54

Balance at end o year 409,010 17.64 453,613 17.61

Exercisable at 31 December 409,010 17.64 453,613 17.61



Annual report 2008

Financial statem

chapt

As o 28 April 2008, the 2008 grant date, the air value o the matching shares

awarded was €23.17 and the air value o the perormance shares awarded was

€13.00.

As o 4 May 2007, the 2007 grant date, the air value o the matching shares

awarded was €29.88 and the air value o the perormance shares awarded was

€17.03. As o 5 May 2006, the 2006 grant date, the air value o the matching

shares was €28.13 and o TNT’s perormance shares awarded was €18.64.

TNT manages its risk in connection with the obligat ions the company has under

the existing share and option plans by purchasing shares in the market. In 2008,

TNT did not purchase any additional shares to cover its obligations under the

existing share and option schemes.

At 31 December 2008, TNT held a total o 1,059,931 shares to cover its

obligations under the existing share and options schemes (2007: 1,716,060).

Principal air value assumptions

2008 2007

Share price (in €) 25.16 32.28

Volatility (%) 23.40 19.30

Vesting period (in years) 3 3

Risk ree rate (%) 4.42 4.33

Dividend yield (%) 2.64 2.48

Depreciation, amortisation and impairments

2008 2007

Amortisation o intangible assets 83 73

Depreciation property, plant and equipment 271 271

Impairment o intangible assets 8

Impairment o property, plant and equipment 37 5

Total 399 349

(in € millions)

The amortisation o intangible assets o €83 million relates to customer list

€17 million (2007: 17) and sotware €66 million (2007: 56). The impairment o

intangibles mainly relates intangibles o “Postkantoren B.V.” The recoverable

value has been determined based on the value in use approach.

19 Depreciation, amortisation andimpairments: 399 million (2007: 349)

The impairment charges o 2008 o property, plant and equipment o €37

million relates to the decommissioning o 9 aircrat o the Express division due

to a decrease in air volumes. The recoverable value has been determined based

on the air value less cost to sell approach taken into account external quotes,

the current status o the aircrat and current market circumstances.

In 2007, the impairment charge related to the assets o the UK parcel contract

in the Mail division.

20 Other operating expense: 727 million (2007: 714)The other operating expenses largely relate to Express or €372 million (2007:

320) and Mail or €344 million (2007: 373). The other operating expenses

consist o IT communication, ofce cost, tr avel and training expense, consulting

and other shared services cost.

Included within other operating expenses are costs incurred or services

provided by TNT’s group statutory auditors, PricewaterhouseCoopers

Accountants N.V.

In 2008, ees or audit services included the audit o TNT’s annual fnancial

statements, procedures on internal controls and the review o interim fnancial

statements, statutory audits, services associated with issuing an audit opinion

on the postal concession reporting and services that only the auditor can

reasonably provide. Fees or audit related ser vices include employee beneft

plan audits, due diligence related to merger s and acquisitions, internal control

reviews, consultation concerning fnancial accounting and reporting matters

not classifed as audit. Fees or ta x services include tax compliance, tax advice,

including all services perormed by the auditor’s proessional sta in its tax

division, except those rendered in connection with the audit. Fees or other

services include fnancial risk management reviews and audit o corporate

sustainability reports.

The ees can be divided into the ollowing categories:

Fees statutory auditorsYear ended at 31 December

2008 2007

Audit ees 6 9

Audit related ees 1 3

Tax advisory ees 1 0

Other ees 1 1

Total 9 13

(in € millions)

In accordance with the Dutch legislation, article 2:382a the total audit ee

related to accounting organisation PricewaterhouseCoopers Accountants N.V.

seated in the Netherlands amounted to €4 million (2007: 5).

Fair value assumptions and hedging

TNT’s share based payments have been measured using the Monte Carlo air

value measurement method. Signifcant assumptions used in TNT ’s calculations

are as ollows:





chapter 6

Interest and similar income: 70 million (2007: 97)Interest and similar income in 2008 o €70 million (2007: 97) mainly relates to

interes t income on banks, loans and deposit s o €44 million (2007: 69) o which

€30 million (2007: 58) relates to a gross up o interest on notional cash pools,

interes t on taxes o €3 million (2007: 5) and interes t on oreign currency hedges

o €17 million (2007: 5).

The change o the air value hedges o €8 million negative relates to the short

term €500 million interest rate swaps which is o set by the air value change o

€8 million positive on the 5.125% Eurobond 2008 which matured in 2008 (see

notes 6 and 14).

Interest and similar expenses: 217 million (2007: 191)Interest and similar expenses in 2008 o €217 million mainly relate to interest

expense on bank overdrats and bank loans o €46 million, (2007: 79) o which

€30 million (2007: 58) relate to a gross up o interest on notional cash pools,

interest expenses on long term borrowings o €124 million (2007: 75), interest

on oreign currency hedges o €35 million (2007: 18), interes t on provision o €6

million (2007: 1) and interes t on taxes €1 million (2007: 6).

The interest income and expense on cash pools are reported on a gross basis

according to IFRS. From an economic and legal perspective this €30 million(2007: 58) interest income ully nets o against the same amount o interest

expense. The amounts are not netted in the income statement because under

IFRS such oset needs in practice to be irreversibly exercised rom time to time.

The interest and similar income and expense on various oreign exchange

derivatives have been aggregated on a gross basis while economically the €17

million o interest income (2007: 5) is ully set o against the €35 million (2007:

18) o interest expenses on hedges.

In light o the current credit crisis, TNT has conservatively overunded itsel

with commercial paper to assure liquidity and subsequently earned €1 million

o interest on short term deposits which were at the same time oset by

commercial paper with an interest cost o €1 million.

Eective income tax rateYear ended at 31 December

2008 2007

Dutch statutory income tax rate: 25.5 25.5

Adjustment regarding eective income

tax rates other countries 2.0 2.6

Permanent dierences:

Non and partly deductible costs 1.5 1.0

Exempt income (0.4)

Other 1.2 0.1

Eecti ve income tax rate 30.2 28.8

(in percentages)

Income taxes dier rom the amount calculated by multiplying the Dutch

statutory corporate income tax r ate with the income beore income taxes. In

2008, the eective income tax r ate was 30.2% (2007: 28.8%), which is higher than the statutory corporate income tax rate o 25.5% in the Netherlands

(2007: 25.5%). This is largely caused by the impact o several non-deductible

costs and the eect o dierent statutory tax rates in countries outside the

Netherlands. Furthermore, included in the line “other” is the adverse eect o

losses or which no deerred tax assets could be recognised due to uncertainty

regarding the recoverability o such assets. This caused the eective tax rate to

increase by 4.7%. This eect was partly oset by the positive impact o 2.2%

relating to the recognition o deerred tax assets or loss carry orward positions

that were previously unrecognised. TNT was able to recognise these assets

based on improvements in projected r esults, enabling the group to substantiate

that recoverability o the assets is probable. The remaining “other” decrease o

1.3% reects the net impact o several smaller positive and negative eects.

21 Net fnancial (expense)/income: -147 million (2007: -94)

Net fnancial expensesYear ended at 31 December

2008 2007

Interest and similar income 62 85

Fair value change air value hedges 8 3

Fair value change o fnancial assets through proft and loss 9

Total interest and similar income 7097

Interest and similar expenses (206) (184)

Fair value change cashow hedge recycled to proft and loss (1) (1)

Fair value change air value hedges (8) (3)

Net oreign exchange losses (2) (3)

Total interest and similar expenses (217) (191)

Net fnancial expenses (147) (94)

(in € millions)

22 Income taxes: 242 million (2007: 316)Income taxes in the statements o income o 2008 amount to €242 million

(2007: 316), or 30.2%, (2007: 28.8%) o income beore income taxes.



Annual report 2008

Financial statem

chapt

Income tax expense consists o the ollowing: In 2008, the current tax expense amounted to €203 million (2007: 269). The

dierence between the total income taxes in the statements o income and

the current tax expense is due to timing dierences. These dierences are

recognised as deerred tax assets or deerred tax liabilities.

At 31 December 2008, the income tax receivable amounts to €37 million

(2007: 35) and the income tax payable amounts to €47 million (2007: 69). In

2008 TNT paid income taxes or an amount o €225 million (2007: 492) o

which 166 related to prior year s.

The ollowing table shows the movements in deerred tax assets in 2008:

Income tax expenseYear ended at 31 December

2008 2007

Current tax expense 203 269

Changes in deerred taxes

(excluding acquisitions / oreign exchange eects) 39 47

Total income taxes 242 316(in € millions)

Movements in deerred tax assets

Provisions

Property,plant and

equipment

Lossescarried

orward Other Total

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

Reclassifcations (3) (6) (1) (11) (21)

Changes charged directly to equity (5) (5)

Changes via statements o income (2) 5 46 (29) 20

(De)consolidation/oreign exchange eects (1) (1) (2)


Reclassifcations 0

Changes charged directly to equity 4 4Changes via statements o income 3 (1) 4 (2) 4

(De)consolidation/oreign exchange eects (2) (1) (3) (6)


(in € millions)

For deerred tax assets an amount o €27 million (2007: 10) is to be recovered

within 12 months and an amount o €178 million is to be recovered ater 12

months (2007: 193).

Deerred tax assets and liabilities are presented net in the balance sheet i TNT

has a legally enorceable right to oset current tax assets against current tax

liabilities and the deerred taxes relate to the same taxation authority.

Out o the total “other” deerred tax assets o €64 million (2007: 62) an amount

o €36 million (2007: 40) relates to temporary dierences or assets that arecapitalised and depreciable or tax purposes only.

The total accumulated losses available or carry orward at 31 December 2008

amounted to €788 million (2007: 720). With these losses carried orward,

uture tax benefts o €221 million could be recognised (2007: 203). Tax

deductible losses give rise to deerred tax assets at the statutory tax rate in the

relevant country. Deerred tax assets are recognised i it is probable that they

will be realised. The probability o the realisation is impacted by uncertainties

regarding the realisation o such benefts, or example as a result o the expir y

o tax losses carried orward and projected uture income. As a result TNT has

not recognised €104 million (2007: 96) o the potential uture tax benefts and

has recorded deerred tax asse ts o €117 million at the end o 2008 (2007: 107).

O the total recognised deerred tax assets or loss carry orward an amount o

€9 million was oset against deerred tax liabilities.

The expiration o total accumulated losses is presented in the table below:

Expiration o total accumulated losses

2009 9

2010 28

2011 31

2012 30

2013 and thereater 323

Indefnite 367

Total 788

(in € millions)





chapter 6

Notes to the consolidated

cash ow statements23 Net cash rom operating activities (continuingoperations): 923 million (2007: 643)

The net cash rom operating activities increased by €280 million rom €643

million in 2007 to €923 million in 2008. The non-cash transactions in the cash

ow statements relate to depreciation, amortisation and impairment charges,

share based payment expenses, result rom investments in associates, oreign

exchange gains and losses, investments in property, plant and equipment

fnanced via fnancial leases, book result on sale o property, plant and equipment

and changes in provisions.

Cash generated rom operationsThe cash generated rom operations increased rom €1,313 million in 2007 to

€1,330 million in 2008. In 2008 the proft beore income taxes contributed €802

million and €1,201 million i adjusted or the non-cash impact o depreciation,amortisation and impairments. This is €247 million lower compared to 2007

(2007: 1,448).

The changes in net pension posi tions o -€209 million compared to 2007 (2007:

-179) reects the lower total non-cash pension charge or the defned beneft

pension schemes o €24 million (2007: 45) and comparable TNT’s total cash

contributions to various pension plans and early retirement payments or a

total amount o €233 (2007: 212).

The change in other provision o €40 million in 2008 is mainly related to

restructuring provision.

In 2008, the net working capital improved by €132 million compared to 2007

(2007: -77) mainly as a result o more ocus on cash ow and particularly

payment behaviour o our customers and payment terms or suppliers in

combination with slightly lower revenues in the ourth quar ter and avourable

timing o certain recurring payments.

Trade working capi tal improved by €124 million compared to 2007. Non-trade

working capital improved by €8 million.

Interest paidThe total cash out ow or interest paid in 2008 is €182 million (2007: 178). In

2008 interest paid mainly includes interest on TNT’s long term borrowings

o €107 million (including fnancial leases o €15 million and long term interest

derivatives o €9 million) (2007: 67), interest payments o €48 million relating

to short term debt (o which €32 million (2007: 89) is a gross up due to cash

pools which is oset in the interest received), realised interest on oreign

currency hedges o €19 million (2007: 17), and interest paid on taxes o €1

million (2007: 11).

The interest paid and received on notional cash pools are reported on agross basis according to IFRS. From an economic and legal perspective this

€32 million (2007: 69) interest paid ully nets o against the same amount

o interest received. The amounts are not netted in the income statement

because under IFRS such oset needs in pr actice to be irreversibly exercised

rom time to time.

Similarly, the interest paid and received on various oreign currency derivatives

have been aggregated on a gross basis while economically the €7 million o

interest received (2007: 5) is ully set o against the €19 million (2007: 18)

o interest paid on hedges.

TNT has received €1 million o interest on short term deposits, which

were at the same time o set by payments on commercial paper or an

amount o €1 million.

For deerred tax liabilities an amount o €14 million (2007: 44) is to be settled

within 12 months and an amount o €321 million (2007: 254) is to be settled

ater 12 months.

The ollowing table shows the movements in deerred ta x liabilities in 2008:

Movements in deerred tax liabilities

ProvisionsProperty, plantand equipment Other Total

Deerred tax liabilities at 31 December 2006 145 65 30 240

Reclassifcations (3) 7 (25) (21)

Changes via statements o income 58 12 (3) 67

(De)consolidation/oreign exchange eects 3 9 12


Reclassifcations 0

Changes via statements o income 45 (4) 2 43

(De)consolidation/oreign exchange eects (8) 2 (6)


(in € millions)



Annual report 2008

Financial statem

chapt

Taxes paidThe cash outow o the total tax payments decreased by €267 million rom

€492 million in 2007 to €225 million in 2008. Taxes paid in 2007 included €166

million payments related to prior years.

24 Net cash used in investing activities (continuingoperations): -257 million (2007: -8)

Interest receivedIn 2008 interest received amounted to €64 million (2007: 85). In 2008 interest

received mainly includes interest relating to short term bank balances anddeposit s o €46 million (2007: 69) (o which €32m (2007: 58) is a gross up due

to nominal cash pools which is oset in the interest paid), realised interest

on oreign currency hedges o €7 million (2007: 5) and interest received on

taxes o €6 million (2007: 5).

Acquisition o group companies (net o cash)In 2008, the total payments net o cash or acquisitions o group companies

amounted to €5 million (2007: 287) and is largely related to small acquisitions

within the Mail division.

Capital expenditure on intangible assetsand property, plant and equipmentIn 2008, net capital expenditures on property, plant and equipment amounted

to €271 million (2007: 272). O this amount, €198 million (2007: 197) related

to Express, €69 million (2007: 73) to Mail and €4 million (2007: 2) to other.

The capital expenditures on intangible assets o €74 million (2007: 97) mostly

related to sotware. In 2008, capital expenditures were unded primarily by

cash generated rom operations.

Proceeds rom sale o property, plant andequipment and intangible assetsProceeds rom the sale o property, plant and equipment in 2008 totalled

€40 million (2007: 85), which mainly related to the sale o several buildings

rom TNT Real Estate B.V. and TNT Real Estate Development B.V.

(totalling €28 million) and buildings and equipment rom the joint venture

Postkantoren B.V. (€3 million) in the Mail segment and equipment in the Express

operations (€10 million).

25 Net cash used in nancing activities(continuing operations): -458 million (2007: -635)

Repurchases o sharesUnder the €500 million share buyback programme as announced on 30 July

2007, TNT purchased 12,225,159 ordinary shares (2007: 22.9 million) in 2008

or an amount o €306 million (2007: 710). The total net cash paid amounted to

€308 million (2007: 710) which covers the shares bought i n 2008 and €2 million

o share purchases during the last days o 2007 which have been paid in 2008.

The company purchased no ordinar y shares in 2008 to cover TNT’s obligations

under the existing management option plans and share grants .

TNT received cash payments o €1 million (2007: 29) or the exercise o

employee stock options in 2008.

Proceeds rom and Repayments to long term borrowingsThe total proceeds on long term borrowings relate to TNT’s new issued

benchmark Eurobond oering £450 million due in August 2018. The £450

million proceeds have been swapped into €568 million with a coupon o 7.14%.

Ater deducting issuing costs and the discount or issuance under par an amount

o €563 million was received.

Proceeds rom and repayments toshort term borrowingsThe total proceeds on short term borrowings mainly relate to new acquired

short term bank debt o €113 million (2007: 99) and to receipts on TNT’s

commercial paper programme o €222 million (2007: -287). The repayments

relate to the repayment o TNT’s 5.125% December 2008 Eurobond o €646

million and to repayments o short term bank debt o €83 million (2007: 45).

Repayments to fnance leasesThe total repayments relate to redemptions on the two Boeing 747’s o

€8 million (2007: 10) and to red emptions on other lease contracts o €17

million (2007: 9).

Dividends paidA fnal cash dividend over 2008, amounting to €202 million or €0.55 per

ordinar y share and a cash interim div idend or 2008 o 122 million or €0.34 per

ordinary share were paid in 2008.

Financing related to TNT’s discontinued operationsIn 2008, no discontinued operations occurred. In 2007, the net cash ow used

or fnancing TNT’s discontinued reight management business amounted to

€1 million.

26 Reconciliation to cash and cash equivalents

The ollowing table presents a reconciliation between the cash ow statementsand the cash and cash equivalents as presented in the balance sheet:

Reconciliation o cash ow statements and the balance sheetsYear ended at 31 December


Cash at the beginning o the year 295 (9.5) 326

Cash rom divested businesses 0 (29)

Exchange rate dierences (6) (3)

Total change in cash (as in consolidated cash ow statements) 208 1

Cash at the end o the year as reported 497 68.5 295






chapter 6

Additional notes27 Business combinations(No corresponding fnancial statement number)

In 2008, TNT entered into two small Mail acquisitions being Idomail GmbH&Co

KG (51%) and Sierra Nova BV (35%) with a total acquisition cost o €2 million

and relating goodwill o €2 million. Both ully paid in cash. In addit ion, contingent

considerations or previous acquisitions accounted or the majority o the

remaining acquisi tion costs o €3 million and goodwill o €5 million.

In 2007, goodwill arising rom the acquisitions o interest in newly acquired

group companies and rom extending TNT’s interest in group companies

amounted to €256 million, mainly due to investments in Expresso Mercúrio

S.A. (Mercúrio) and Huaya Hengji Logistics Company LIM (Hoau).

28 Commitments and contingencies(No corresponding fnancial statement number)

Specifcation o-balance sheet commitmentsAt 31 December

2008 2007

Guarantees 22 20

Rent and operating lease 914 959

Capital expenditure 19 42

Repurchases own shares 0 6Purchase commitments 112 80

(in € millions)

O the total commitments indicated above, €372 million are o a short term

nature (2007: 377).

GuaranteesTNT has issued €22 million (2007: 20) in guarantees or the beneft o

unconsolidated companies and third parties, that when due, would result in

an additional obligation. In addition, TNT group companies have issued various

corporate and bank guarantees on behal o subsidiaries which do not lead to

additional obligations as they guarantee the per ormance o TNT subsidiaries

under its ordinary course o business. As o 2008 those guarantees are no

longer included in the total commitments and contingencies since that resulted

in a double count o the total commitments. The comparative numbers havebeen adjusted accordingly. Guarantees provided by TNT N.V. are disclosed

in note 41.

Rent and operating lease contractsIn 2008 operational lease expenses (including rental) in the consolidated

statements o income amounted to €419 million (2007: 404). Future payments

on non-cancellable existing lease contracts mainly relating to real estate,

computer equipment and other equipment were as ollows:

Repayment schedule o rent and operating leasesAt 31 December

2008 2007

Less than 1 year 254 249

Between 1 and 2 years 202 208




Thereater 162 200

Total 914 959

o which guaranteed by a third part y/customers 34 9

(in € millions)

Capital expenditureCommitments in connection with capital expenditure are €19 million (2007:

42), o which €19 million is related to property, plant and equipment. These

commitments primarily related to projects within the operations o the Express

division.

Purchase commitmentsAt 31 December 2008 TNT had unconditional purchase commitments o

€112 million (2007: 80) which were primarily related to various service and

maintenance contracts. These contracts or service and maintenance relate

primarily to inormation technology, security, salary registration, cleaning and

aircrat.

Contingent tax liabilitiesMultinational groups o the size o TNT are exposed to varying degrees

o uncertainty related to tax planning and regulatory reviews and audits.

TNT accounts or its income taxes on the basis o its own internal analyses,

supported by ex ternal advice. TNT continually monitors its global tax position,

and whenever uncertainties arise, TNT assesses the potential consequences

and either accrues the liability or discloses a contingent liability in its fnancial

statements, depending on the strength o the company’s position and the

resulting risk o loss.

Contingent legal liabilities

Ordinary course litigationThe company is involved in several legal proceedings relating to the normal

conduct o its business, such as claims or loss o goods, delays in delivery,

trademark inringements, subcontracting and employment issues, and general

liability. The majority o these claims are or amounts below €1 million and are

insured and/or provided or. TNT does not expect any liability arising rom any

o these legal proceedings to have a material eect on its results o operations,

liquidity, capital resources or fnancial position. The company believes it has

provided or all probable liabilities deriving rom the normal course o business.

Liège court case

In Belgium, judicial proceedings were launched by people living around Liège

airport to stop night ights and seek indemnifcation rom the Walloon Region,

Liège airport and its operators (including TNT). On 29 June 2004 the Liège

Court o Appeal rejec ted the plaintis’ claims on the basis o a substantiated



Annual report 2008

Financial statem

chapt

legal reasoning. Thereupon, the plaintis lodged an appeal with the Belgian

Supreme Court, which did cancel the 2004 judgement o the Liège Court o

Appeal on 4 December 2008. The matter has been sent to the Brussels Court

o Appeal or new submissions and pleadings. A new decision is not expected

beore at least two to three years.

29 Financial risk management(No corresponding fnancial statement number)

TNT’s activities expose the company to a variety o fnancial risks, such asmarket risks (including oreign currency exchange risk and interest rate risk),

credit risk and liquidity risk. All o these risks arise in the normal course o

business. In order to manage the market risks TNT utilises a variety o fnancial

derivatives.

The ollowing analyses provide quantitative inormation regarding TNT’s

exposure to the fnancial risks described above. There are certain limitations

inherent in the analyses presented, primarily due to the assumption that rates

change in a parallel ashion and instantaneously. In addition, the analyses are

unable to reect the complex market reactions that normally would arise rom

the market shits assumed.

TNT uses derivative fnancial instruments solely or the purpose o hedging

exposures. The company enters into contracts related to derivative fnancial

instruments or periods commensurate with its underlying exposures and does

not take positions independent o these exposures. None o these fnancial

instruments are leveraged or used or trading purposes or to take speculative

positions.

Financial risk management is carried out by Group Treasury under policies

approved by the Board o Management. Group Treasury identifes, evaluates

and hedges fnancial risk in close cooperating with operating units. The Board

provides written principles or overall risk management, as well as written

policies covering specifc areas, such as oreign exchange risk, interest rate

risk, credit risk and liquidity risk. Periodic reporting on fnancial risks has been

embedded in the overall risk ramework and has been provided to the Board o

Management in a struc tural way.

Interest rate risk Part o TNT’s borrowings and leases are against oating interest rates. These

oating interest rates may uctuate substantially and could have a material

adverse eect on TNT’s fnancial results in any given reporting period.

Borrowings that are issued at variable rates, expose the company to cash owinterest risks. Borrowings that are issued at fxed rates expose the company

to air value interest rate risk. TNT’s fnancial assets are on average o such

short term nature that they bear no signifcant air value, but do cause cash ow

interest rate risks.

Group policy is to signifcantly limit the impact o interest uctuations over

a term o seven years as a percentage o earnings beore interest, taxes,

deprecation and amortisation At 31 December 2008, TNT’s gross interest

bearing borrowings, including fnance lease obligations, totalled €2,241 million

(2007: 2,085), o which €1,977 million (2007: 1,860) was at fxed interes t rate.

Although, TNT generally enters into interest rate swaps and other interest

rate derivatives in order to attempt to reduce its exposure to interest rate

uctua tions, these measures may be inadequate or may subject the company to

increased operating or fnancing costs.

At 31 December 2008, i interest rates on borrowings had been 1% higher

with other variables held constant the proft beore income tax would have

been €2 million higher (2007: -3), mainly due to €497 million o outstanding

cash and €264 million o short term debt. The proft beore operating taxes is

less sensitive to interest rate movements compared to 2007 due to a decrease

in short term interest bearing debt. Equity would be impacted by €11 million

(2007: 36), due to the outst anding interest rate swap(s) with a carrying value o

US$262 million (see also note 31).

Foreign currency exchange risk TNT operates on an international basis gener ating oreign currency exchange

risks arising rom uture commercial transactions, recognised assets and

liabilities, investments and divestments in oreign currencies other than the

euro, TNT’s unctional and reporting currency. TNT’s treasury department

matches and manages the intragroup and external fnancial exposures.

Although the company generally enters into hedging arrangements and

other contracts in order to reduce its exposure to currency uctuations,

these measures may be inadequate or may subject t he company to increased

operating or fnancing costs.

The main two currencies o TNT’s external hedges are the British pound and

US dollar o which the 2008 exchange rates are shown below:

Principal exchange ratesYear end closing1 Annual average2

British pound 0.95250 0.80165

US dollar 1.39170 1.47430

1 – Source: European Central Bank, reerence rate on the last day o the year.2 – The annual average is calculated as the 12-months’ average o the month-end-closing rates

o the European Central bank.

Management has set up a policy to require group companies to manage their

oreign exchange risk against the unctional currency. Group companies are

required to hedge material balance sheet exposures via the use o oreign

exchange derivatives with Group Treasury, whereby a fnancing company

operated by Group Treasury trades these oreign exchange derivatives with

external banks. TNT currently has no net investment hedges outstanding.

Signifcant acquisitions and local debt is usually unded in the currency o the

underlying assets.

At 31 December 2008, i the euro had weakened 10% against the US Dollar with

all other variables held constant, the proft beore income tax on the oreignexchange exposure on fnancial instruments would have been €1 million higher

(2007: 1). The net income sensitivity to movements in EUR /USD exchange

rates compared to 2007 has not changed. Equity would have been negatively

impacted by €3 million (2007: -1).

At 31 December 2008, i the Euro had weakened 10% against the British

Pound with all other variables held constant the proft beore income tax on

the oreign exchange exposure on fnancial instruments would have been €0

million lower (2007: 0). The net income sensitivity to movements in EUR/GBP

exchange rates compared to 2007 has not changed. Equity would have been

positively impacted by €17 million (2007: 0).

Credit risk Credit risk represents the loss that the company would incur i counterparties

with whom TNT enters into fnancial transactions are unable to ulfl the





chapter 6

terms o the agreements. Credit risk arises rom cash and cash equivalents,

derivatives and deposits with banks and fnancial institutions as well as credit

exposures relating to customers. The company attempts to minimise its credit

risk exposure by only transacting to fnancial institutions that meet established

credit guidelines and by managing its customer’s portolio. TNT continually

monitors the credit standing o fnancial counterparties and its customers.

Individual risk limits are set on internal and exter nal ratings in accordance with

limits set by the board. The utilisation o credit limits is regularly monitored. At

reporting date there were no signifcant concentrations o credit risk. The top

ten customers o TNT account or 7% o the outstanding trade receivables asper 31 December 2008.

Liquidity risk Prudent liquidity risk management implies maintaining sufcient cash and

marketable securities, the availability o unding through an adequate amount

o committed credit acilities and the ability to close out market positions. Due

to the dynamic nature o the underlying businesses, TNT attempts to maintain

exibility in unding by keeping committed credit lines available. A downgrade in

TNT’s credit rating may negatively aect its ability to obtain unds rom fnancial

institutions and banks and increase its fnancing costs by increasing the interest

rates o its outstanding debt or the interest rates at which the company is able

to refnance existing debt or incur new debt. Furthermore, other non TNT specifc

adverse market conditions could also turn out to have a material adverse eect on

the company’s unding ability.

TNT has the ollowing undrawn committed acilities:

Committed acilitiesAt 31 December

2008 2007

Multicurrency Revolving Credit Facility 1,000 1,000

Total commited acilities 1,000 1,000

(in € millions)

The table below analyses TNT’s fnancial liabilities into relevant maturity

groupings based on the remaining period on the balance sheet to the

contractual maturity date. The outgoing ows disclosed in the table are

the contractual undiscounted cash ows which contains the redemptions

and interest payments.

Liquidity risk scheduleLess than

1 year Between

1 and 3 yearsBetween

3 and 5 years Thereater Bookvalue

Outgoing fows based on the nancial liablities 2008Euro Bonds 86 172 172 1,870 1,489

Other loans 349 2 2 3 351

Financial leases 25 44 34 162 230

Interest rate swaps - outgoing 65 122 360 792 135

Foreign exchange contracts - outgoing 766 43



Other current liabilities 169 169

Mitigation incoming fows based on the nancial liabilities 2008

Interest rate swaps - incoming 48 95 330 663

Foreign exchange contracts - incoming 766

Total liquidity risk 1,096 245 238 2,164 2,867

Outgoing fows based on the nancial liablities 2007

Euro Bonds 729 101 101 1,271 1,656Other 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




Mitigation incoming fows based on the nancial liabilities 2007

Interest rate swaps - incoming 49 38 271 28

Foreign exchange contracts - incoming 642

Total liquidity risk 1,402 180 194 1,538 2,579

(in € millions)



Annual report 2008

Financial statem

chapt

Capital structure managementIt is TNT’s objective when managing capital structure to saeguard its ability to

continue as a going concern in order to provide returns or shareholders and

benefts or other stakeholders and to maintain an optimal capital structure.

TNT’s capit al structu re is managed along the ollowing components: (I) maintain

a credit rating at investment grade around “BBB+ level”; (2) an availability o at

least €500 million o undrawn committed acilities (via a €1,000 million euro

commercial paper programme supported by a bank acility o €600 million until

2012 and €400 million until 2015); (3) structured unding via a combination o

public and bank debt, with a risk weighted mix o fxed and oating interest; (4)cash pooling systems acilitating optimised cash requirements or the group and

(5) a tax optimal internal and external unding ocused at optimising the cost o

capital or the group, within long term sustainable boundaries.

A downgrade in TNT’s credit rating may negatively aect its ability to obtain

unds rom fnancial institutions, retain investors and banks and increase its

fnancing costs by increasing the interest rates o its outst anding debt or the

interest rates at which the company is able to refnance existing debt or incur

new debt. This could aect TNT’s returns or shareholders and benefts or

other stakeholders.

The terms and conditions o TNT’s material long and short term debts as well

as its material (drawn or undrawn) committed credi t acilities do not include any

fnancial covenants. There are also no possibilities to accelerate these material

debts and committed acilities in case o a credit rating downgrade. The debt

and credit acility instruments vary on a case by case basis and mostly contain

customary clauses as are generally observed in the market such as negative

pledge conditions, restrictions on (the use o the proceeds o ) the sale o assets

or businesses and in most cases change o control clauses.

30 Financial instruments(No corresponding fnancial statement number)

Summary fnancial instrumentsThe accounting policies or fnancial instruments have been applied to the

ollowing line items:

Impact fnancial instruments on assetsAt 31 December

NotesLoans and

receivables

Financial assets atair value through

proft and lossHeld to maturity

investmentsAvailable

or sale Total

Assets as per balance sheet 2008

Other loans receivable 3 5 5

Other prepayments and accrued income 3 21 12 33

Accounts receivable 5 1,574 1,574

Prepayments and accrued income 6 257 41 298

Cash and cash equivalents 7 497 497

Total 2,354 53 0 0 2,407

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 6 232 4 236

Cash and cash equivalents 7 295 295

Total 2,209 17 0 0 2,226

(in € millions)





chapter 6

Impact fnancial instruments on assetsAt 31 December

NoteFinancial liabilties measured

at amortised costsDerivatives used

or hedgingOther fnancial

liabilities Total

Liabilities as per balance sheet 2008

Long term debt 12 1,710 135 1,845


Other current liabilities 13 565 43 608

Total 2,689 178 0 2,867

Liabilities as per balance sheet 2007

Long term debt 12 1,265 29 1,294


Other current liabilities 13 932 17 949

Total 2,533 46 0 2,579

(in € millions)

Eurobond

The tota l €1,050 million (2007: 1,696) and £450 million (2007: 0) o Eurobonds

is measured at amor tised cost o €1,489 million (2007: 1,664), being the nominal

value corrected or the costs and issuance under par (‘at a discount’) that are

still to be amortised. The book value is equal to the amor tised cost value. The

oreign exchange exposure on the £450 million Eurobond is hedged via the

£450/ €568 cross currency swap.

At 31 December 2008 a air value adjustment o positive €8 million (2007: 8)

adjusted the amorti sed cost value o €1,664 to the book value o €1,656 million.

The air value adjustment o positive €8 million was mitigated by the negative

€8 million o air value on the €500 million o interest rate swaps. Both balance

sheet items have matured. The value changes o €8 million have been booked in

to the income statement, see note 12.

For the outstanding Eurobonds, see the table below:

Overview o EurobondsAt 31 December

Nominalvalue

Costs / discount to be amortised

Hedgeaccounting

Fair valueadjustment

Carryingvalue

Fair value

3.875% Eurobond 2015 400 23 No 377 347

5.375% Eurobond 2017 650 4 No 646 583

7.500% Eurobond 2018 (GBP)1 568 5 Yes 466 449

Total outstanding Eurobonds 2008 1,618 32 0 1,489 1,379

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

Total outstanding Eurobonds 2007 1,696 32 8 1,656 1,723

(in € millions)

1– The dierence between the nominal value and the carrying value mainly relates to movements in the GBP/EUR exchange rate. The dierence between the carrying value and the air value relates tochanges in the relevant interbank interest rates.

Finance leases

Total debt on fnance leases consist o fnancial lease contracts on buildings

(depots), trucks and airplanes.



Annual report 2008

Financial statem

chapt

Overview o Finance leasesAt 31 December

Nominalvalue

Fixed / oatinginterest

Hedgeaccounting

Carryingvalue

Fair value

Boeing 747 ERF 189 oating Yes 189 158

Other leases 41 oating/fxed No 41 43

Total outstanding Finance leases 2008 230 230 201

Boeing 747 ERF 186 oating Yes 186 186

Other leases 44 oating / fxed No 55 52

Total outstanding Finance leases 2007 230 241 238

The air value o all fnancial instruments has been calculated using interbank

interest rate swap (‘IRS’) and oreign currency rates whereby the air value

o these instruments has been adjusted or the euro credit spread o TNT’s

obligations over these IRS rates.

Interest rate swaps

TNT has USD 262 million (2007: 273) o interest rate swaps outstanding or

which TNT pays fxed and receives oating interest. These interest rate swaps

act as a hedge on the cash ow interes t rate risk on the Boeing 747 ERF fnancial

lease contracts.

During the fnancial year TNT had €500 million o interest rate swaps

outstanding or which TNT received fxed and paid oating interest. These

interest rate swaps acted as a hedge against the air value interest rate risk o

TNT’s 5.125% December 2008 Eurobond. Both the interes t rate swaps and the

Bond matured as per December 2008.

Overview o interest rate swapsAt 31 December

NominalForwardStarting Currency Outstanding Pay Receive Hedge

Fair valuein €

Settlementamount in €

Interest rate swaps 2008

128 No USD Yes fxed oating cash ow (14)


400 Yes Euro No fxed oating cash ow 2

500 No Euro No oating fxed air value

Cross currency swaps 2008

250 No USD/EUR Yes oating oating cash ow (9)

5681 No GBP/EUR Yes fxed fxed cash ow (95)

Interest rate swaps 2007

500 No Euro Yes oating fxed air value (8)

400 Yes Euro Yes fxed oating cash ow 1

600 Yes Euro No fxed oating cash ow 0



154 Yes USD No fxed oating cash ow (3)

Cross currency swaps 2007

250 No USD/EUR Yes oating oating cash ow (23)

(in € millions)1 – Please also see under explanatory text relating oreign exchange contracts.

Furthermore TNT unwound €400 million o orward starting interest rate

swaps because o the £450 million Eurobond that was issued in GBP instead o

euro. The air value o €2 million is booked to the income statement .

As all prior orward starting swaps have been designated as cash ow hedges,

the market value movements o the eective portion o the hedges have been

included in equity. The market value will stay in equity (the hedge reserve) and

will be straight-line amortised to the income statement. Ne t fnancial expense

includes an amortisation o €1 million rom the hedge reserve.

The total ineective portion recognised in the income statement that arises

rom the usage o air value hedges amount to a proft/loss o €0 million (2007:

0 million). The total ineective portion recognised in the income statement that

arises rom the usage o cash ow hedges amount to a loss o €0 million (2007:

1 million).

An overview o interest rate and cross currency swaps is presented below:

For the outstanding Finance leases, see the table below:





chapter 6

The air value has been calculated against the relevant market rates at 31

December 2008 and 31 December 2007 respectively.

Foreign exchange contracts.

TNT entered into short term oreign exchange derivatives to hedge oreign

exchange air value and cash ow risks. The air value o these outstanding

oreign exchange hedges is recorded as a current asset in ‘prepayments and

accrued income’ or as a current liability in ‘total current borrowings’. The

oreign exchange result on the outstanding air value hedges is recorded in the

income statement and mitigates the oreign exchange exposure and results on

the underlying balance sheet items.

The air value o the GBP/EUR swap cross currency swap mainly relates to

movements in the GBP/EUR exchange rates and o sets the movement in the

carr ying value o the £450 million 7.5% Eurobond 2018.

The details relating to outs tanding oreign exchange contracts are presented

below:

Outstanding oreign exchange contracts

NoteAt 31 December

Carrying value Fair value Nominal value HedgeAmount in

equity

Foreign exchange contracts 2008

Asset 6 41 41 837 Fair value 0

Liability 13 (43) (43) 766 Fair value 0

Foreign exchange contracts 2007

Asset 6 4 4 461 Fair value 0

Liability 14 (9) (9) 642 Fair value 0

(in € millions)

The air value has been calculated against the relevant market rates at 31

December 2008 and 31 December 2007 respectively.

The cash ow hedges on highly probable orecasted tr ansactions denominated

in oreign currency are expected to occur at various dates during the next 12

months. Gains and losses recognised in the hedging reserve in equity on the

eective portion o the orward exchange contracts as o 31 December 2008

amount to €0 (2007: 0). These reserves are recogni sed in the income statement

in the period or periods during which the hedged orecasted tr ansaction aects

the income statement.

The total ineective portion recognised in the income statement that arises

rom the usage o air value hedges amount to a proft/loss o €0 million (2007:

0 million). The total ineective portion recognised in the income statement that

arises rom the usage o cash ow hedges amount to a proft/loss o €0 million

(2007: 0 million).

31 Earnings per share(No corresponding fnancial statement number)

To compute diluted earnings per share, the average number o shares

outstanding is adjusted or the number o all potentially dilutive shares. At 31

December 2008 TNT had potential obligations under stock option and share

grant s to deliver 3,788,712 shares (2007: 3,294,553). There was no dierence in

the income attributable to shareholders in computing TNT’s basic and diluted

earnings per share.

For calculating basic earnings per share, an average o 363,566,403 ordinary

shares is taken into account. For calculating diluted earnings per share an

average number o 364,704,745 ordinar y shares is taken into account.

The ollowing table summarises TNT’s computation related to earnings per

share and diluted earnings per share:

Outstanding shares inormationYear averages and numbers at 31 December

2008 2007

Number o issued and outstanding ordinary shares 360,021,821 379,224,255

Shares held by the company to cover share plans 1,059,931 1,716,060

Shares held by the company or cancellation 0 6,977,275

Average number o ordinary shares per year 363,566,403 383,028,938

Diluted number o ordinary shares per year 1,138,342 2,043,048

Average number o ordinary shares per year on ully diluted basis in the year 364,704,745 385,071,986



Annual report 2008

Financial statem

chapt

32 Joint ventures(No corresponding fnancial statement number)

The company accounts or joint ventures in which TNT and another party

have equal control according to the proportionate consolidation method.

TNT’s only signifcant joint venture as at 31 December 2008 is the 50%

interest in Postkantoren B.V. with Postbank N.V. to operate post ofces in the

Netherlands.

Key pro rata inormation rega rding all o TNT’s joint ventures in which TNT has joint decisive inuence over operations is set orth below and includes balances

at 50%:

Key pro rata inormation on joint venturesYear ended at 31 December

2008 2007

Non-current assets 45 48

Current assets 195 155

Equity 28 54

Non-current liabilities 119 77

Current liabilities 93 72

Net sales 359 339

Operating income (16) 15

Prot attributable to the shareholders (19) 12

Net cash provided by operating activities 30 5

Net cash used in investing activities (5) (3)

Net cash used in fnancing activities (30) (13)

Changes in cash and cash equivalents (5) (11)

(in € millions)

33 Related party transactions and balances(No corresponding fnancial statement number)

The TNT group companies have trading relationships with a number o joint

ventures as well as with unconsolidated companies in which TNT holds minority

shares. In some cases there are contractual arrangements in place under which

TNT companies source supplies rom such undertakings, or such undertakings

source supplies rom TNT.

During 2008, sales made by TNT companies to its joint ventures amounted to

€14 million (2007: 18). Purchases o TNT rom joint ventures amounted to €134

million (2007: 83). The net amounts due to the joint venture entities amounted

to €69 million (2007: 65). As at 31 December 2008, no mater ial amounts were

payable by TNT to associated companies.

Related party transactions with TNT’s pension und and the Board o

Management and Supervisory Board are presented in note 10 and 18

respectively.

34 Segment inormation(No corresponding fnancial statement number)

The presentation o segment inormation in the consolidated fnancial

statements is presented rom a product perspective. The Board o Management

receives operational and fnancial inormation on a monthly basis which is

primarily based on the dierent products and customer solutions TNT oers.

In addition, segment inormation rom a geographical perspective has been

presented to give an overview o the main markets. TNT distinguishes between

the ollowing three repor table segments:Express business. The Express business provides demand door-to-door –

express delivery services or customers sending documents, parcels and

reight.

Mail business. The Mail business provides services or collecting, sorting, –

transporting and distributing domestic and international mail.

Other network business. The other network business provides time-critical –

deliveries to individually agreed delivery point or business customers during

the night.

Although the Other network business does not meet the quantitative

thresholds as required by IFRS 8, management concluded that this segment

should be reported, as this segment has its own network apar t rom the Express

and Mail business and alls under the responsibility o the chie fnancial ofcer.

The measure o proft and loss and assets and liabilities is based on the TNT

Group Accounting Policies which are compliant with IFRS.

The pricing o intercompany sales is done at arms’ leng th.





chapter 6

Segment inormation relating to the income statementYear ended at 31 December 2008

Express MailOther

networksInter-

company Non-

allocated Total

Net sales 6,515 4,199 269 0 10,983

Inter- company sales 6 12 1 (19)

Other operating revenues 132 34 3 169

Total operating revenues 6,653 4,245 273 (19) 0 11,152

Other income 7 26 2 35

Depreciation/impairment property, plant and equipment (208) (95) (3) (2) (308)

Amortisation/impairment intangibles (53) (36) (1) (1) (91)

Total operating income 376 633 11 (38) 982

Net fnancial income/(expense) (147)

Results rom investments in associates (33)

Income tax (242)

Proft/(loss) rom discontinued operations 0

Prot or the period 560

Attributable to:

Minority interests 4

Equity holders o the parent 556

Number o employees 75,537 86,052 1,385 271 163,245

(in € millions, except employees)

Taxes and net fnancial income are dealt at Group Level and not within the

reportable segments. A s a result this inormation is not presented as part o the

reportable segments. The key fnancial perormance indicator or management

o the reportable segments is Operating income which is reported on a monthly

basis to the chie operating decision makers.

The material exceptional non cash items in the 2008 income statement are

impairment charges relating to property, plant and equipment o €37 million

and intangible assets o €8 million o which €38 million relates to the Express

division and €7 million relates to the Mail division. In addition, restructuring

charges o €102 million have been recorded o which €74 million or Mail and

€28 million or Express. Other material non cash items are book profts on

the sale o property, plant and equipment o €31 million (2007: 72) and the

impairment on Logispring o €30 million.

Segmentation – resultsIn the table below a reconciliation is presented o the segment inormation

relating to the income statement o the reportable segments:



Annual report 2008

Financial statem

chapt

Segment inormation relating to the income statementYear ended at 31 December 2007

Express MailOther

networksInter-

company Non-

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 fnancial income/(expense) (94)

Results rom investments in associates 1

Income tax (316)

Proft/(loss) rom discontinued operations 206

Prot or the period 989

Attributable to:

Minority interests 3

Equity holders o the parent 986

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

(in € millions, except employees)

In 2007, the discontinued reight management business was not included in

the segment inormation shown but reported as proft/loss rom discontinued

operations.

Non-allocated operating incomeYear ended at 31 December

2008 2007

Business initiatives (14) (13)

World Food Programme/Planet Me (9) (10)

Other costs (15) (21)

Total (38) (44)

(in € millions)

In 2008, non-allocated operating costs amounted to €38 million (2007: 44).

Included in these costs is €14 million (2007: 13) or business initiatives, which

mainly relate to investigations to optimise TNT’s network s trategy introduced

in 2005 and costs relating to an initiative to ur ther drive value “below the line”.

Costs made to support the World Food Programme (WFP) and Planet Me

amounted to €9 million (2007: 10). Included in the cost or WFP are costs or

knowledge transer, hands on support, raising awareness and unds or the

World Food Programme including cash donations. Planet Me is a TNT initiative

to have an active contribution to reduce CO2 emission to avoid urther global

warming. The other cos t were €15 million (2007: 21).

Balance sheet inormationBelow a reconciliation is presented o the segment inormation relating to the

balance sheet o the reportable segments:

Segment inormation relating to the balance sheetAt 31 December 2008

Express MailOther

networksNon-

allocated Total

Goodwill paid in the year 3 4 7

Intangible assets 1,700 312 50 1 2,063

Capital expenditure on property, plant and equipment 214 70 1 4 289

Property, plant and equipment 1,045 576 7 6 1,634

Investments in associates 1 7 86 94

(Trade) accounts receivable 991 521 33 29 1,574

Total assets1 4,189 1,691 96 1,209 7,185

Total liabilities 1,492 1,066 23 2,847 5,428

(in € millions)

1 – Identifable assets also used or the segments have been allocated on the basis o estimated usages.





chapter 6

The capital expenditure relating to intangible assets amount to €50 million (2007:

69) or Express and €23 million (2007: 26) or Mail and €1 million (2007: 0) or

Other networks.

The balance sheet inormation at 31 December 2007 is as ollows:

Segment inormation relating to the balance sheetAt 31 December 2007

Express Mail

Other

networks

Non-

allocated TotalGoodwill 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

Investments in associates 2 1 80 83

(Trade) accounts receivable 1,147 441 35 33 1,656

Total assets1 4,504 1,622 95 864 7,085

Total liabilities 1,483 1,113 27 2,511 5,134

(in € millions)

1 – Identifable assets also used or the segments have been allocated on the basis o estimated usages.

Geographical segment inormationThe segment inormation rom a geographical perspective is derived as ollows:

the basis o allocation o net sales by geographical areas is the country or –

region in which the entity recording the sales is located; and

Geographical inormation relating to total net salesYear ended at 31 December

2008 2007

Europe

The Netherlands 3,579 3,619

United Kingdom 1,445 1,599

Italy 857 825

Germany 1,098 1,041

France 725 703

Belgium 332 300

Rest o Europe 1,188 1,158

Americas

USA and Canada 50 52

Brazil 259 244

South & Middle America 35 32

Arica & the Middle East 123 103

Australia & Pacifc 486 478

Asia

China and Taiwan 510 447

India 74 77

Rest o Asia 222 207

Total net sales 10,983 10,885

(in € millions)

segment assets and investments are allocated to the location o the assets , –

except or TNT goodwill arising rom the acquisition o TNT Ltd/GD Express

Worldwide which is not allocated to other countries or regions but to the

Netherlands.



Annual report 2008

Financial statem

chapt

Geographical inormation relating to the total assets and capital expendituresAt 31 December 2008

Intangibleassets

Property,plant and

equipmentFinancial

fxed assetsPension

assetsTrade

receivable

Other currents

assetsTotal

assets1

Capitalexpenditures

assets

Europe

The Netherlands2 1,010 617 80 726 274 591 3,298 97

United Kingdom 168 280 5 174 96 723 92

Italy 48 41 35 253 59 436 23

Germany 135 81 60 115 38 429 18

France 287 75 8 100 24 494 17

Belgium 31 314 15 73 33 466 14

Rest o Europe 69 80 20 150 85 404 46

Americas

USA and Canada 3 35 6 4 48 1

Brazil 130 37 2 22 15 206 16

South & Middle America 1 2 1 9 5 18 1

Arica & the Middle East 3 3 1 27 14 48 2

Australia & Pacifc 21 64 38 40 7 170 18

Asia

China and Taiwan 131 22 72 48 273 8

India 28 3 2 16 9 58 3

Rest o Asia 1 12 5 39 32 89 7

Total 2,063 1,634 307 726 1,370 1,060 7,160 363

Geographical inormation relating to the total assets and capital expendituresAt 31 December 2007

Intangibleassets

Property,plant and

equipmentFinancial

fxed assetsPension

assetsTrade

receivable

Other currents

assetsTotal

assets1

Capitalexpenditures

assets

Europe

The Netherlands2 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 o Europe 70 60 11 182 110 433 27

AmericasUSA 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

Arica & the Middle East 3 4 24 16 47 2

Australia & Pacifc 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 o Asia 4 11 6 34 38 93 6

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

(in € millions)

1 – Total assets exclude Assets held or sale.2 – Including the goodwill arising rom the acquisition o TNT Ltd/GD Express Worldwide.





chapter 6

Gegraphical inormation relating to the employeesAt 31 December

Express MailOther

networksNon-

allocated 2008 2007

Europe

The Netherlands1 2,901 59,196 196 269 62,562 62,166

United Kingdom 12,119 899 13,018 12,909

Italy 3,159 1,468 4,627 4,534

Germany 4,386 14,243 963 19,592 19,563France 4,740 26 1 4,767 4,899

Belgium 2,480 601 46 3,127 3,086

Rest o Europe 8,790 9,433 180 18,403 17,123

Americas

USA and Canada 805 57 862 844

Brazil 6,312 6,312 6,428

South & Middle America 546 546 549

Arica & the Middle East 1,777 10 1,787 1,569

Australia & Pacifc 5,112 5,112 4,935

Asia

China and Taiwan 16,649 118 1 16,768 16,692

India 2,192 2,192 2,395

Rest o Asia 3,569 1 3,570 3,890

Total 75,537 86,052 1,385 271 163,245 161,582

1 – Including temporary employees on TNT’s payroll.

35 Subsequent events

(No corresponding fnancial statement number)

Acquisition o Lit CargoOn 16 February 2009 TNT announced to acquire 100 per cent o the shares

o LIT Cargo, a leading express delivery company in Chile. The acquisition gives

TNT a strong nationwide road network in Chile and str engthens its position

in the country’s domestic express delivery market. Furthermore, it adds a

key building block to the development o its South American Road Network

(SARN), linking Chile to Brazil and Argentina. The acquisition fts ully in TNT’s

strategy to become the intra-regional express leader in South America and to

leverage this regional strength to grow intercontinental ows. Lit Cargo has t he

largest owned express parcel network in Chile and operates with new acilities,a modern eet and several market-leading technologies. The company operates

with almost 500 vehicles, 1,500 employees and has a nationwide coverage,

through its 55 distribution centers.

Revenue or 2008 amounted up to €32 million and net proft ate r tax amounted

to €2 million. Over the last 3 years, Lit Cargo has shown high revenue growth

rates (25%+).

The acquisition price o Lit Cargo is €39 million. The pre-acquisition balance

sheet and the preliminary opening balance sheet o the acquired business are

summarised below:

Balance sheet data o LIT Cargo

Pre-acquisitionbalance sheets

(unaudited) Acquisition

Goodwill 0 21

Other non-current assets 17 26

Total non-current assets 17 47

Total current assets 9 9

Total assets 26 56

Equity 8 39

Non-current liabilities 9 9

Current liabilities 9 9

Total liabilities and equity 26 56

(in € millions)



Annual report 2008

Financial statem

chapt

Other non-current assets include an amount o approximately €9 million

relating to separately identifed intangible assets with respect to the acquisition.

For customer relationship we estimate a useul lie o 12 years and or brand

name 3 years.

TNT Mail increases services on transaction mailOn 9 February 2009, TNT Mail announced to urther increase its activities

relating to transaction mail by acquiring the activities rom Getronics

Document Services in the Netherlands. By this acquisition TNT reinorces itsposition on the printing market. TNT expec ts to fnalise this transaction in the

course o 2009.

36 Postal regulation and concession

(No corresponding fnancial statement number)

Postal regulation in the Netherlands

Proposed legislation

On 5 June 2007 the Dutch Second Chamber o Parliament adopted a new Dutch

Postal Act. This Ac t oresees the ull liberalisation o the Dutch postal market

ahead o the EU timetable. To ensure that the mandatory postal ser vices are

provided, it is intended to assign Koninklijke TNT Post B.V. the Universal Postal

Service. The Postal Act will have to be approved by the Dutch First Chamber o

Parliament beore it enters into orce. The enactment date is dependent on the

condition o a level playing feld in real terms at the postal markets o Germany

and the United Kingdom, as well as on acceptable employment conditions at

the new postal operators in the Netherlands.

In December 2007, May 2008, and November 2008, the Dutch junior Minister

o Economic Aairs made use o the so-called ‘emergency-brake procedure’

when liberalisation was postponed. The Minister based his decisions on two

arguments. Firstly, the lack o clarity about the level playing feld in Germany and

secondly, the ongoing discussion in the Netherlands on labour conditions.

The eects o the introduction o a high and generally binding minimum

wage in the German postal sector are considered undesirable by the

Bundesnetzagentur, the German postal regulator. Furthermore, t he exemption

Deutsche Post enjoys with regard to VAT remains a barrier to competition that

is still subject to debate in German politics (see also below under value added

tax on postal services). TNT challenged the German government regarding the minimum wage, as it considered this minimum wage unconstitutional.

In its judgement o 7 March 2008, the administrative court in frst instance

(Verwaltungsgericht) held that the mandatory €9.80 minimum wage is

invalid. The German government fled an appeal against that decision with

the administrative court in second instance (Oberverwaltungsgericht). On 18

December 2008, the Ober verwaltungsgericht confrmed the decision o the

court in frs t instance. However, the court also ruled that TNT ’s claim, being

one o three claimants, was not admissible and reerred TNT’s claim to the

labour courts. It is likely that TNT will fle an appeal against the inadmissibility

o its claim, because the decision o the court on TNT’s inadmissibility is not

in line with recent jurisprudence as to claims o this nature. The German

government fled a urther appeal (revision) against the decision to the Federal

Administrative Court (Bundesverwaltungsgericht) in Leipzig.

As a result, these minimum wages are still generally binding. Moreover,

the German Labour Ministry is in the process o preparing changes in social

legislation to simpliy declaring generally binding minimum wages. On 26

March 2008, TNT lodged a complaint at the European Commission against

the German government or inringement o European Treaty in concern to

the undamental rules on competition and reedom o establishment. The

discussion in the Netherlands on labour conditions is still ongoing. Although the

new postal operators and the unions reached a collective labour agreement in

November 2008, the unions have asked or political support or compliance o

this agreement. Thereore, the Dutch cabinet started talks with employers andunions. An intended new date or liberalisation has not been set yet.

The Dutch First Chamber o Parliament is expected to vote on the Dutch

Postal Act only i the conditions are satisactorily met. A new Dutch Postal

Decree, being lower legislation, has passed the Dutch Second Chamber o

Parliament, while a new Dutch Postal Regulation still has to be published. This

Postal Regulation deals amongst others with tari and reporting requirements.

Current legislation

In the Netherlands, the key legislation regulating TNT’s Mail activities is the

Dutch Postal Act. This Act requires TNT to perorm the mandatory postal

services in the Netherlands, some o which are exclusive to TNT (the

reserved postal services). In connection with the Dutch Postal Act there is

the parliamentary Postal Decree, which specifes the services that constitute

the mandatory postal services and defnes the scope o the reserved postal

services. The combination o these mandates and exclusive rights is commonly

called the “Postal Concession”. The Postal Concession is perormed by TNT’s

subsidiary Koninklijke TNT Post B.V.

Furthermore, there is a General Postal Guidelines Decree, which specifes

TNT’s obligations regarding the perormance o mandatory postal ser vices and

the transparency o the fnancial accounting o these services according to the

EU Postal Directive.

OPTA, the independent Supervisory Authority or Post and Telecommunications

established by the government, supervises TNT’s perormance o the

mandatory postal services. The responsibility or postal policy remains under

the authority o the Minister o Economic Aairs.

The postal concession

Mandatory postal services

The domestic mandatory postal services mainly consist o the conveyanceagainst payment o standard single rates o the ollowing postal items:

letters (including reply items) and printed matter with a maximum individual –

weight o two kilogrammes,

postal parcels with a maximum individual weight o 10 kilogrammes, and –

registered, registered insured and registered value declared items. –

In addition, bulk mail o letters up to an individual weight o 50 grammes, which

are conveyed against other than standard single rates, are part o the mandatory

postal services. Mandatory postal services also cover rental o P.O. boxes.

The Postal Act does not require TNT to provide the delivery o bulk printed

matter such as advertising, magazines and newspapers, the delivery o bulk

letters with an individual weight above 50 grammes or unaddressed mail items.





chapter 6

For international inbound and outbound mail, based on the Dutch Postal Act

and in accordance with the rules o the UPU, mandatory postal services mainly

comprise the conveyance against payment o both postal items at standard

single rates and o bulk mail items at other than standard single rates with a

maximum individual weight o two kilogrammes and o postal parcels with a

maximum individual weight o 20 kilogrammes. In addition, mandatory postal

services cover the postal services regulated by the UPU.

Regulatory conditions or the provision o mandatory postal services

Regarding mandatory postal services the General Postal Guidelines Decreeimposes various regulatory conditions on TNT with respect to service

provision, taris, cost and revenue accounting, fnancial administration and

reporting. Other than the mandatory postal services, none o TNT’s postal

services is subject to governmental control.

According to section 2d o the Dutch Postal Act, TNT is obliged to give its

competitors entrance to its P.O. boxes. This service has to be delivered against

reasonable, objectively justifable and non-discriminatory conditions and

remunerations. To date these conditions and remunerations are negotiated

results between parties. A similar, voluntary arrangement is made with TNT’s

competitors with regard to return-to-sender items o competitors that enter

TNT’s processes through the collection boxes.

With respect to service levels, the General Postal Guidelines Decree requires

TNT to provide a level o service that complies with modern standards, to

provide nationwide services and to per orm a delivery round every day, except

or Sundays and public holidays. TNT is required to deliver not less than 95%

o all domestic letters the day ater the day o posting, not including Sundays

and public holidays. TNT is required to maintain a network o ser vice points

(letter boxes, post ofces and agents) or the access o the general public to the

services. With respect to rates and conditions, TNT is required to set r ates and

associated conditions that are transparent, non-discriminatory and uniorm.

However, TNT may grant volume discounts or items o correspondence and

negotiate specifc prices and conditions with high volume users. TNT is urther

required to submit proposed rate changes to OPTA, which has to assess

whether the proposed changes are in accordance with the price cap sys tem.

The price cap system measures tari developments in two dierent baskets o

services, a “total basket” and a “small users basket”. The total basket comprises

domestic mandatory postal services provided to all customers. The small users

basket comprises the same services in mutual relations which are representative

or consumers and small business users.

The price cap sys tem uses a weighing actor or each service in these baskets.

Up to 2008 the levels o the indices or both baskets were not to exceed the

ofcial national index o wages or employees in the market sector.

Reserved postal servicesUnder the Dutch Postal Act and the Postal Decree, the reserved postal services

include the ollowing exclusive rights:

the conveyance o domestic and inbound international letters with a –

maximum individual weight o 50 grammes at a rate o less than two and a

hal times the standard single r ate (currently €0.44),

the exclusive right to place letter boxes intended or the public alongside or –

on public roads, and

the exclusive right to issue postal stamps and imprinted stamps bearing the –

likeness o the monarch and/or the word “Nederland”.

These exclusive rights do not extend to courier ser vices. The exclusive rights

also do not extend to the conveyance o parcels, letters weighing in excess o 50

grammes and printed materials such as advertising, newspapers and magazines.

In addition, the exclusive rights do not ex tend to the conveyance o letters by a

business to its own customers.

Accounting and other fnancial obligations

TNT’s obligations on reporting include the establishment o an annual report

on TNT’s perormance o the mandatory postal services. TNT’s fnancial

accounting obligations require TNT to maintain separate fnancial accountswithin its internal fnancial administration or mandatory postal ser vices. This

separate accounting must be broken down into reserved postal services and

other mandatory postal services and must be separated rom the accounting

o TNT’s other activities. Every year, TNT must submit to OPTA a declaration

o an independent auditor, appointed by OPTA, that its fnancial accounting

system complies with these obligations. This declaration has to be published by

OPTA in the “Staatscourant”.

Underlying this accounting system and the fnancial reports to OPTA is a system

or allocating cost and revenues to the dierent t ypes o 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 orming part o the mandatory postal services. The ip side o this is that

or mandatory postal services TNT cannot deduct the VAT amounts paid on

its purchases o services and goods related to the mandatory services. TNT is

required to charge VAT on all services not included in the mandatory services,

i.e. the services in competition with other operators. Competitors are required

to charge VAT on those items as well. Thereore, in the Netherlands there is

a level playing feld or competitors and TNT on these services. In most other

Member States o the EU the scope o mandatory serv ices is very large. Hence a

VAT exemption is given to national postal operator s over a considerable part o

the postal market in these countries, services with individually negotiable prices

included. According to the European Commission, this distorts the unctioning

o the Internal Market or postal services. It has launched an inringement

procedure against Sweden, Germany and the United Kingdom on this VAT

issue in order to resolve it.

TNT has launched a procedure in the United Kingdom. The competent Court

has asked the European Court o Justice some pre-judicial questions. The

Advocate General advised on 15 January 2009 in Case C-357/07 that only the

universal services provided in the public interest are exempt rom VAT. The

advice continues that the exemption cannot, in any event, apply where itemsare carried at individually negotiated prices. This advice and the answers o the

European Court o Justice will be o interest to the European Commission in

the inringement procedures.

In Germany, new VAT-legislation is under construction . It seems that in practice

Deutsche Post will be able to maintain its exemption.



Financial statem

chapt

TNT N.V. Corporate balance sheetsAt 31 December

Notes Beore proposed appropriation o proft 2008 variance % 2007

AssetsNon-current assets

Investments in group companies 5,633 4,250

Investments in associates 56 77

Financial fxed assets at air value 11 11

Deerred tax assets 1

37 Total fnancial fxed assets 5,700 31.4 4,339

38 Pension asset 790 25.2 631

Total non-current assets 6,490 30.6 4970

Current assets

Accounts receivable rom group companies 4 5

Other accounts receivable 1 1

Cash and cash equivalents 1 7

Total current assets 6 (53.8) 13

Total assets 6,496 30.4 4,983

Liabilities and equity 9 39 Equity

Issued share capital 173 182

Additional paid in capital 876 982

Cumulative translation adjustment (212) (82)

Hedge reserves (35) (22)

Other reserves 497

Unappropriated proft 434 871

Total shareholders' equity 1,733 (10.3) 1,931

Non-current liabilities

13 Euro Bonds 1,489 1,019

Total non-current liabilities 1,489 46.1 1,019

Current liabilities

Accounts payable to group companies 3,131 1,289

Short term provision 33 44


Accrued current liabilities 37 29

Total current liabilities 3,274 61.0 2,033



TNT N.V. Corporate statements o incomeYear ended at 31 December

2008 2007

Results rom continuing operations 579 720

Results rom discontinued operations 0 206

Results rom investments in group companies ater taxes 579 926

Other income and expenses ater taxes (23) 60

Proft attributable to the shareholders 556 986

(in € millions)

The accompanying notes orm an integral part o the fnancial statements.





chapter 6

Notes to the corporate balance sheets and statements o income

Accounting policies or valuation and

determination o result TNT N.V.The corporate fnanc ial statements or the year ended 31 December 2008 have

been prepared in accordance with Part 9 o Book 2 o the Netherlands Civil

Code. TNT has applied the option in Article 362 (8) to use the same principles

o valuation and determination o result or the corporate fnancial statements

as the consolidated fnancial statements. As a r esult TNT’s investments in group

companies are stated using the equity method. For the principles o valuation

o assets and liabilities and or the determination o results reerence is made to

the notes to the consolidated balance sheet and statements o income.

Statement o changes fnancial fxed assetsInvestments

in groupcompanies

Investments inassociates

Deerred taxassets

Financial fxedassets atair value Total

Balance at 31 December 2006 3,672 56 5 0 3,733

Changes in 2007

Results 926 (5) 921

Acquisitions/additions to capital 192 26 15 233

Disposals/dividend (459) (4) (13) (476)


Other changes 9 9Total changes 578 21 (4) 11 606


Changes in 2008

Results 579 (32) 547

Acquisitions/additions to capital 3,041 11 3,052

Disposals/dividend (2,108) (1) (2,109)


Total changes 1,383 (21) (1) 0 1,361


(in € millions)

37 Total fnancial fxed assets: 5,700 million (2007: 4,339)



Annual report 2008

Financial statem

chapt

38 Pension asset: 790 million (2007: 631)TNT N.V. is the sponsoring employer or two Dutch pension plans, which are

externally unded and are covering the majority o TNT’s employees in the

Netherlands. In accordance with IAS 19.34a the net defned beneft cost is

recognised in the corporate fnancial statements o TNT N.V. The other group

companies recognise the costs equal to the contribution payable or the period

in their fnancial statements. For TNT N.V. the contributions received rom

Pension disclosures2008 2007

Change in beneft obligation

Beneft obligation at beginning o year (4,010) (4,468)



Actuarial (loss)/gain 681 701

Benefts paid 106 90

Beneft obligation at end o year (3,549) (4,010)

Change in plan assets

Fair value o plan assets at beginning o year 4,721 4,602

Actual return on plan assets (674) 104

Participant contributions 116 105

Benefts paid (106) (90)

Fair value o plan assets at end o year 4,057 4,721

Funded status as per 31 December

Funded status 508 711

Unrecognised net actuarial loss 253 (114)

Unrecognised prior service costs 29 34

Pension assets 790 631

Components o employer pension expense



Expected return on plan assets 373 369

Amortisation o actuarial loss (5) (1)

Other costs (3)

Participant contributions 116 105

Total post employment beneft income/(expenses) 158 137

Weighted average assumptions as at 31 December

Discount rate 6.1% 5.7%

Expected return on plan assets 7.1% 7.9%

Rate o compensation increase 2.0% 2.0%

Rate o beneft increase 1.2% 2.0%


other group entities oset the pension expense. The impact o the contributions

is represented as par ticipant contributions in the table below.

The table below reconciles the opening and closing balances o the present

value o the defned beneft obligation and the air value o plan assets or the

TNT N.V. sponsored group pension plans.

For additional details on the Dutch pension plans, see note 10.





chapter 6

39 Equity: 1,733 million (2007: 1,931)

Consolidated statements o changes in total equity

Issued sharecapital

Additionalpaid incapital

Translationreserve

Hedgingreserve

Other reserves

Retainedearnings

Totalshareholders’

equity

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

Proft or the period 986 986Gains/(losses) on cashow hedges, net o tax (1) (1)

Currency translation adjustment (81) (81)

Total recognised income or the year 0 0 (81) (1) 0 986 904

Final dividend previous year (183) (183)

Appropriation o net income 378 (378) 0

Interim dividend current year (115) (115)

Repurchases and cancellations o shares (21) (263) (423) (707)

Share based compensation 14 14

Other 4 31 35

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

Balance at 31 December 2007 182 982 (82) (22) 0 871 1,931

Proft or the period 556 556

Gains/(losses) on cashow hedges, net o tax (13) (13)

Currency translation adjustment (129) (129)

Total recognised income or the year 0 0 (129) (13) 0 556 414

Final dividend previous year (202) (202)

Appropriation o net income 669 (669) 0

Interim dividend current year (122) (122)

Repurchases and cancellations o shares (9) (106) (191) (306)

Share based compensation 16 16

Other (1) 3 2

Total direct changes in equity (9) (106) (1) 0 497 (993) (612)

Balance at 31 December 2008 173 876 (212) (35) 497 434 1,733

(in € millions)

The translation and hedge reserves are legal reser ves. The total amount o these legal

reserves amount to -€247 million (2007: -104) which limits the dividend distributionor this amount. For additional det ails on equity, see note 9.



Annual report 2008

Financial statem

chapt

40 Wages and salaries(No corresponding fnancial statement number)

TNT N.V. does not have any employees. Hence no salary and social security

costs were incurred. In accordance with IAS 19.34 the net defned beneft

cost shall be recognised in the corporate fnancial statements o TNT N.V.

For urther inormation on defned beneft pension costs, see note 38. For the

remuneration o the Board o Management and Supervisory Board, see note

18.

41 Commitments not included in the balance sheet(No corresponding fnancial statement number)

Declaration o joint and several liability As at 31 December 2008 TNT N.V. has issued a declaration o joint and several

liability or some o its group companies in compliance with article 403, Book 2

o the Netherlands Civil Code.

Those group companies are:

Koninklijke TNT Post B .V. –

TNT Holdings B.V. –

TNT Express Holdings B.V. –

TNT Head Ofce B .V. –

TNT Finance B.V. –

TNT Real Estate B .V –

TNT Real Estate Development B.V –

Cendris Customer Contact B.V. –

Cendris Dataconsulting B.V. –

Cendris Document Presentment B .V. –

BSC South Arica B.V. –

Euro Mail B.V. –

Netwerk VSP B.V. –

TNT Express Worldwide N.V. –

TNT Express Road Network B.V. –

TNT Innight B.V. –

TNT Skypak Finance B.V. –

TNT Skypak International (Netherlands) B.V. –

TNT Transport International B.V. –

TNT Fashion Group B.V. –

TNT Express Nederland B.V. –

PTT Post Holding s B.V. –

Fiscal unity in the Netherlands

TNT N.V. orms a fscal unity with several Dutch entities or corporate income tax and VAT purposes. The ull list o Dutch entities which are part o the fscal

unity is included in the list containing the inormation reerred to in article 379

and articl e 414, Book 2 o the Netherlands Civil Code , which is fled at the ofce

o the Chamber o Commerce in Amsterdam. A company and its subsidiaries

that orm part o the respective fscal unities are jointly and severally liable or

taxation payable by these fscal unities.

GuaranteesTNT N.V. has provided parental support in the orm o specifc guarantees to

various subsidiaries, in addition to the declaration o joint and several liability

in compliance with article 403, Book 2 o the Netherlands Cival Code: €1,000

million or a revolving current credit acility, several loan and guarantee acilities

including a €1,000 million commercial paper programme and a €175 million

cash pooling credit acility as well as various guarantees included in International

Swaps and Derivatives Association (ISDA) agreements with banks or the

trading o fnancial derivatives.

Furthermore, guarantees o €39 million (2007: 20) were issued or credit and

oreign exchange acilities to its indirect subsidiaries TNT China Holdings Co.

Ltd.,TNT Express Worldwide (China) Ltd. and Mach++ Express Worldwide

Ltd. In addition, TNT N.V. issued €22 million (2007: 20) in guarantees or the

beneft o unconsolidated companies and third parties, that when due, would

result in an additional obligation.

Parental support in the orm o an indemnity has been provided by TNT N.V. to

its indirect subsidiary TNT Holdings (UK) Ltd. and its subsidiaries in connection

with the acquisi tion o TNT PTY Ltd . in 1996 and the fnancing o this acquisi tion

and as a result o the restr uctur ing o the group in the course o 1997 as a direct

consequence o this acquisition.

42 Subsidiaries and associated companiesat 31 December 2008(No corresponding fnancial statement number)

The ull list containing the inormation reerred to in article 379 and article 414,

Book 2 o the Netherlands Civil Code is fled at the ofce o the Chamber o

Commerce in Amsterdam.

Amsterdam, 16 February 2009

Board o ManagementM.P. Bakker (Chairman)

C.H. Van Dalen

H.M. Koorstra

M.C. Lombard

Supervisory BoardP. Klaver (Chairman)

R.J.N. Abrahamsen

M. Harris

V. Halberstadt

J.A.M. Hommen

G. Kampouri Monnas

R. King

W. Kok S. Levy

G. Ruizendaal

TNT N.V.Neptunusstraat 41-63

2132 JA Hooddorp

P.O Box 13000

1100 KG Amsterdam

The Netherlands





chapter 6

Other inormationTo the General Meeting o Shareholders o TNT N.V.

Auditor’s report

Report on the fnancial statements We have audited the fnancial statements over 2008 o TNT N.V., Amsterdam,

set out on pages 49 - 106. These fnancial statements consist o the consolidatedfnancial statements and the corporate fnancial statements. The consolidated

fnancial statements comprise the consolidated balance sheet as at 31 December

2008, consolidated statement o income, consolidated cash ow statement and

consolidated statement o changes in total equity or the year then ended, and

a summary o signifcant accounting policies and other explanatory notes. The

corporate fnancial statements comprise the corporate balance sheet as at 31

December 2008, the corporate statement o income or the year then ended

and the notes.

Board o Management’s responsibility The Board o Management o the company is responsible or the preparation

and air presentation o the fnancial statements in accordance with International

Financial Reporting Standards as adopted by the European Union and with

Part 9 o Book 2 o the Netherlands Civil Code, and or the preparation o the

Report o the Board o Management set out on pages 7 - 46, pages 109 - 112

and pages 136 - 137 in accordance with Pa rt 9 o Book 2 o the Netherlands Civil

Code. This responsibility includes: designing, implementing and maintaining

internal control relevant to the preparation and air presentation o t he fnancial

statements that are ree rom material misstatement, whether due to raud

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 fnancial 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 perorm our

audit to obtain reasonable assurance whether the fnancial statements are ree

rom material misstatement.

An audit involves perorming procedures to obtain audit evidence about

the amounts and disclosures in the fnancial statements. The proceduresselected depend on the auditor’s judgment, including the assessment o the

risks o material misstatement o the fnancial statements, whether due to

raud or error. In making those risk assessments, the auditor considers internal

control relevant to the company’s preparation and air presentation o the

fnancial statements in order to design audit procedures that are appropriate

in the circumstances, but not or the purpose o expressing an opinion on the

eectiveness o the company’s internal control. An audit also includes evaluating

the appropriateness o accounting policies used and the reasonableness o

accounting estimates made by the Board o Management, as well as evaluating

the overall presentation o the fnancial statements.

We believe that the audit evidence we have obtained is sufcient and appropriate

to provide a basis or our audit opinion.

Opinion with respect to the consolidatedfnancial statementsIn our opinion, the consolidated fnancial s tatements, set out on pages 49 - 101,

give a true and air view o the fnancial posi tion o TNT N.V. as at 31 December

2008, and o its result and its cash ow or the year then ended in accordance

with International Financial Reporting Standards as adopted by the European

Union and with Part 9 o Book 2 o the Netherlands Civil Code.

Opinion with respect to the corporatefnancial statementsIn our opinion, the corporate fnancial statements, set out on pages 102 - 106,

give a true and air view o the fnancial posi tion o TNT N.V. as at 31 December

2008, and o its result or the year then ended in accordance with Par t 9 o Book

2 o the Netherlands Civil Code.

Report on other legal and regulatory requirementsPursuant to the legal requirement under 2:393 sub 5 part o the Netherlands

Civil Code, we report, to the extent o our competence, that the report o the

Board o Management set out on pages 7 - 46, pages 109 - 112 and pages 136 -

137, is consistent with the fnancial statements as requi red by 2:391 sub 4 o the

Netherlands Civil Code.

Amsterdam, 16 February 2009

PricewaterhouseCoopers Accountants N.V.

Originally signed by drs. M. de Ridder R A

Extract rom the articles o association

on appropriation o proftUnder TNT’s current articles o association, the dividend specifed in article

35, paragraph 1 will be paid on the preerence shares B i outstanding. Subject

to the approval o TNT’s Supervisory Board, the Board o Management will

determine which part o the proft remaining ater payment o dividend on any

preerence shares B will be appropriated to the reser ves (article 35, paragraph

2). The remaining proft ater the appropriation to reserves shall be at the

disposal o the general meeting o shareholders (articles 35, paragraph 3). No

dividends shall be paid on shares held by TNT in its own capital (article 35,

paragraph 6). Preerence shares B have not been issued.

Appropriation o proftSubject to the adoption o TNT’s fnancial statements by the annual general

meeting o shareholders, the proposed 2008 dividend has been set at €34

cents per ordinary share o €48 cents. The dividend o €34 cents has been paid

as an interim dividend and consequently there will be no fnal dividend.



Annual report 2008

Financial statem

chapt

Appropriation o proft

2008

Proft attributable to the shareholders 556

Appropriation in accordance with the articles o association:

Reserves adopted by the Board o Management and approved

by the Supervisory Board (article 35, par.2) (434)

Dividend on ordinary shares 122

Interim dividend paid 122

Final dividend 0

(in € millions)

Other DistributionsTNT expects the severe downturn in the economic environment which

occured in 2008 to continu in 2009 without any substansive improvement.

Consequently, the Board o Management o TNT has decided, with the approval

o the Supervisory Board, not to distribute a urther cash dividend over 2008,

but to propose a stock dividend to be paid out o the distributable reserves o

one share or every 40 shares which, based on the volume weighted average

share price o 11 - 13 February 2009 (€14.66) equals €37 cents per share.

The stock dividend level is derived rom the decision to maintain the dividend

pay-out percentage o normalised net income over 2008 at about the 2007

level, resul ting in a proorma 36.3% over 2008.

As a result, the dividend over 2008 will be €34 cents per share being the already

paid interim dividend in cash. Together with the proposed stock dividend to be

paid out o distributable reser ves, the total proorma dividend relating to 2008

will thus be €71 cents per share.

The ex-dividend date is 14 April 2009, the dividend distribution date is 21 April2009.

Group companies o TNT N.V.The list containing the inormation reerred to in article 379 and article 414

o Book 2 o the Dutch Civil Code is fled at the ofce o the Chamber o

Commerce in Amsterdam.

Subsequent eventsInormation rela ting to subsequent event s is disclosed in note 35 to the fnancial

statements.



BOARD OF MANAGEMENT

COMPLIANCE STATEMENT


chapter 7

BOARD OF MANAGEMENT

COMPLIANCE STATEMENT

The management o risks, internal control, integrity and compliance orms an

integral part o the business management within TNT and continues to be

strengthened and embedded into TNT’s business objectives setting processes

and its operations.

Risk management, internal

control, integrity andcompliance systemsThis section provides an overview o TNT’s approach to risk management,

internal control, integrity and compliance. It also documents the necessary

Risk Management, Internal Control, Integrity and Compliance Framework

GHO & Divisions

Internal Audit

External Audit

Disclosure CommitteeEthics Committee

Group Integrity

Group Risk Management& Internal Control

Group BusinessControl

Board of Management

Group HR Group Legal

Group Public AffairsGroup Communications

Group Policies / Group Key Controls / Company Wide Controls

COSO – Enterprise Risk Management / Integrated Framework

Auditcommittees TNT

Audit committeeSupervisory Board

Other Supervisory Board committees

Supervisory Board

Board of ManagementStatutory / Fiduciary obligations

Group Strategy Development, Corporate Secretary

disclosures as required by the Board o Management under the most recent

best practice provisions o the proposed revised Dutch corporate governance

code and the EU Transparency Directive as incorporated in chapter 5.3 o the

Dutch Financial Markets Supervision Act (Wet op het fnancieel toezicht ). The

nature and, where possible, the ex tent o TNT’s exposure to risks is described

in chapter 13.

The TNT approach to risk

management, internal control,integrity and complianceA pictorial and narrative description o TNT ’s risk management and control

ramework and its structure is provided below.

The ramework shows that the Board o Management is supported in

developing and achieving its strategic, operational and fnancial objectives by

group and division unctions in the areas o risk management, control, integrity,

reporting, tax, treasury, legal and corporate secretary, HR, public aairs and

communications. These supporting unctions are responsible or ensuring that

the legal and regulatory compliance objectives are achieved. The Board o

Management and the related group and divisional unctions have ensured that

the ramework is est ablished primarily around eight business cycles o group

policies, procedures and internal controls covering revenue, procurement,

HR, fnancial reporting, treasury, tax, legal and compliance, and inormation

systems. Independent and internal monitoring and oversight unctions provide

a second and third line o control and assurance in addition to that provided by

the line unctions.



Annual report 2008

Board o Management compliance statem

chapt

TNT has embedded the Committee o Sponsoring Organisations o the

Treadway Commission (COSO) Enterprise Risk Management – Integrated

Framework as the oundation o its risk management and control system. Built

upon this ramework is a comprehensive portolio o group policies and key

controls which direct and instil discipline in the company’s business operations.

The Board o Management has created a structure to support the development

and implementation o these policies and controls, thus acilitating the discharge

o statutory and fduciary obligations. The Supervisory Board, its Audit

Committee and other committees perorm an oversight role, whilst the TNT

internal audit unction and the company’s external auditors support the Boardo Management and the Supervisory Board in monitoring the risk management,

internal control, integrity and compliance ramework.

General ComplianceThe group policies and procedures reect and defne “the tone at the top”

and the group’s way o doing business. Group policies have been reviewed and

where necessary revised to strengthen existing internal controls. The Board o

Management will continue to ocus on this area in the coming year to ensure

that there are eective and ef cient group policies as the oundation o TNT’s

risk management, internal control, integrity and compliance systems.

Strategies have been established or the group and translated into clear

objectives, among other things with regard to business, markets, fnancial

results, human resources and sustainability. The objectives are reviewed in

the annual strategic review and the budget process or the group and at the

level o TNT’s operational units. Perormance and compliance are monitored

regularly in discussions between the appropriate management and the Board

o Management, through the Letter o Representation (signed by all managing

and fnance directors o TNT’s group entities, and divisional and group level

employees that report directly to the Board o Management), by internal audits

carried out by the corporate audit services unction, and by the monitoring

duties o TNT’s divisional audit committees.

Risk managementIn 2008, the impact o the global macroeconomic downturn accompanied by

signifcant uncertainty within the fnancial markets has created an environment

in which risk management processes have also had to adapt to the changing

dynamics. TNT recognises that risk remains as an intrinsic component o doing

business, however a structured and transparent risk management process

acilitates management to identiy, manage and prepare or risks in an inormed,

controlled and transparent manner. TNT’s enterprise-wide risk managementsystems are thereore designed to identiy principal key strategic, operational,

legal and regulator y, and fnancial risks acing the group in the pursuit o its Focus

on Networks strategy outlined in chapter 2.

Whilst continuous emphasis has been placed on the identifcation o risks at

all levels o the organisation and to develop mitigating actions, the constant

changes in the environment in 2008 has made it challenging to keep abreast o

the rapidly evolving situation. During 2008 the risk profle within TNT changed

signifcantly with many previously reported inherent risks becoming specifc

within a very short period o time. TNT management has reviewed the risk

profle regularly throughout the year and will continue to do so regularly during

2009. For those risks deemed to be material, comprehensive mitigating action

plans are developed and reviewed regularly by the Board o Management. All

operational units worldwide continued to participate in the comprehensive

risk identifcation process, the outcome o which is reported to the relevant

divisional group and unctional management. In addition, regular status report s

o risk mitigating actions are provided to the Board o Management to urther

strengthen the company’s risk management processes. The outcome o the risk

management process is shared and discussed with the audit committee o the

Supervisory Board and the Supervisory Board.

The risks currently acing TNT’s strategic, operational, legal and regulatory,

and fnancial objectives are outlined in chapter 13. Chapter 13 also sets out theimpact the current economic situation is having on TNT and it s operations and

fnancial perormance, and outlines and where possible describes the ex tent

o the corrective actions which are either in progress, have been realised or

are in preparation. In addition key r isks have been classifed by risk category

and urther classifed into specifc risks and inherent risks acing the group.

Specifc risks are r isks that the Board o Management believes could negatively

impact TNT’s short to medium term objectives, whilst inherent risks are those

risks that are constantly present in the business environment but which are

considered sufciently material to require disclosure and management. The

main specifc risks which the Board o Management believes key risks in 2009

in summary are:

sharp volume declines and shits in customer preerences rom premium –

international express products to international economy products in TNT

Express (directly related to the declining macroeconomic situation) could

result in urther rationalising TNT’s Express operations and the air and road

networks,

the loss o key customers/suppliers due to insolvency/bankruptcy in a –

worsening macroeconomic environment and the impact this could have on

cash ow,

the urther liberalisation o the Dutch and EU postal markets, –

a downturn in the capital markets and/or a decline in interest rates may –

increase the discounted present value o TNT’s defned benef t pension und

liabilities, which in turn could require signifcant additional unding by TNT,

measures taken to r educe costs, including employee redundancies, may not –

achieve the results intended and could adversely aect TNT’s employee

relations, reputation, revenues and proftability, and

a downgrade in TNT’s credit rating may increase TNT’s fnancing costs and –

could harm TNT’s ability to fnance its operations and acquisitions.

For the mentioned key risks mitigation actions were defned.

The Board o Management believes that this approach to risk management and the disclosure o both specifc and inherent r isks is comprehensive and prudent

given the shit seen over 2008 with many inherent risks, particularly fnance

risks which have a direc t correlation with macroeconomic actors, becoming

specifc.

Internal control over

fnancial reportingTNT’s Board o Management is and remains commit ted to continuing to provide

a high standard o corporate governance, inormation and disclosure, in line with

the current Dutch corporate governance code and regulatory requirements.

The Board o Management is ocused on continuously strengthening TNT’s




Board o Management compliance statement

chapter 7

internal control over fnancial reporting, whereby the positive elements o

TNT’s ormer obligations under the Sarbanes-Oxley Act continue to orm a key

part o TNT’s approach to governance, internal control and reporting because

the Board o Management ully believes that this approach and investment will

continue to support a solid platorm or sustainable value crea tion or the group.

TNT’s Board o Management has chosen to expand the scope o the internal

controls over fnancial reporting ramework beyond the minimum requirements

that would have been mandatory according to the Sarbanes-Oxley Act, to

include some smaller entities as well as the newly acquired entities in China

and Brazil. In 2009 the design scope will also be expanded to include the newly acquired entity in India and some additional smaller entities.

TNT’s specifc approach to internal control over fnancial reporting continues

to be generally based on section 4 04 o the Sarbanes-Oxley Act 2002 and the

associated guidance to management issued by the United States Securities and

Exchange Commission in May 2007 as well as the principles outlined in Auditing

Standards 2 and 5 as promulgated by the Public Companies Accounting

Oversight Board (PCAOB). However, this does not imply an assessment o

the adequacy and eectiveness o TNT’s internal control and risk management

processes over fnancial reporting under section 404 o the Sarbanes-Oxley

Act, nor is there an assessment by TNT’s external auditor to that extent.

Throughout 2008, TNT continued to invest considerable time and resources

documenting and evaluating the design o internal controls over fnancial

reporting as well as continuing the comprehensive programme o testing

the operational eectiveness o the company’s internal control over fnancial

reporting. TNT has also refned its system o entity level controls which are

applicable to all entities worldwide. This latter system includes an integrity

awareness and training programme (see below) and a robust por tolio o group

policies and procedures.

Integrity TNT’s Integrity Programme consists o our parts: guidance, awareness and

compliance, embedding, and monitoring.

Guidance is set out in the TNT Business Principles which have been ormally

adopted and approved by the Board o Management and Super visory Board.

The TNT Business Principles, together with other integrity-related group

policies and procedures, are published on TNT’s corporate website. These

group policies deal with topics such as compliance with laws and regulations,

accurate and timely disclosure o inormation, transparency, equal opportunities,

air treatment, conict o interest, corruption, air competition and corporateresponsibility. The TNT Business Principles are aligned with the UN Global

Compact (since 2002) and the Partnering Against Corruption Initiative

principles (since 2008). TNT’s integrity-related group policies and procedures

include the TNT Group Procedure on Whistleblowing, the TNT Group Policy

on Fraud Prevention, the TNT Group Policy on Gits and Enter tainment and

the TNT Group Policy on Disciplinary Actions. The latter policy makes clear

that non-compliance with TNT’s group policies will not be tolerated.

Awareness and compliance are enhanced by communication, and web-based

and ace-to-ace training. Interactive integrity workshops have been and

continue to be held or senior and higher management in all parts o the world.

Senior managers, on the basis o the “train the trainer” principle, thereater

cascade this training and communication down into their organisations,

thus ulflling their responsibility or the roll-out o the Integrity Programme.

TNT acilitates and monitors this process. Furthermore, TNT developed a

web-based training on the TNT Business Principles, raud prevention and raud

detection, which is used to train critical management as well as a large group o

other managers and employees.

The TNT Business Principles and related group policies are being embedded

in TNT’s str ategic and operational decision processes. Integrity has become

part o TNT’s Group Policy on Mergers and Acquisitions and an integrity due

diligence procedure as well as an integrity post-acquisition review have become

part o TNT’s mergers and acquisitions process. Furthermore, new employeeso TNT are required to certiy their acknowledgement and understanding o

the TNT Business Principles when entering employment.

The TNT Integri ty Programme is monitored in several ways: (i) senior management

sign-o in a Letter o Representation every hal year, (ii) internal audits, and (iii)

yearly engagement surveys. The TNT Integrity Programme is part o the entity

level controls, and compliance is sel-assessed annually by management.

Another important monitoring tool is the TNT Group Procedure on Whistle-

blowing. Under this procedure employees are encouraged to promptly report any

breach or suspected breach o any law, regulation, the TNT Business Principles

or other company policies and procedures, and any other alleged irregularities.

Employees can report the (suspected) breach directly to their line manager or to

the Group Integrity depar tment. In 2008, 140 reports were received (in 2007: 82 ).

Approximately 19% o these complaints involved employment related matters (in

2007: 32%). The total fnancial impact o the substantiated cases is not material and

appropriate remedial actions have been taken.

Directors’ responsibility statementThe Dutch corporate governance code under section II .1.4 requires the Board

o Management to examine strategic, operational, legal and regulatory, fnancial

and fnancial reporting risks.

The Board o Management confrms that it is responsible or TNT’s risk

management, internal control, integrity and compliance systems and has

reviewed the operational eectiveness o these systems or the year ended 31

December 2008. The outcome o this review and analysis has been shared with

the audit committee and the Super visory Board and has been discussed withTNT’s external auditors.

The Board o Management believes to the bes t o its knowledge based on t he

outcome o the TNT-specifc approach to risk management, internal control,

integrity and compliance as outlined above, that TNT’s risk management and

internal control over fnancial reporting have worked eectively over the year

ended 31 December 2008 and provide a reasonable assurance that the fnancial

reporting is ree rom material inaccuracies or misstatement.

The above however does not imply that TNT can provide certainty as to the

realisation o business and fnancial strategic objectives, nor can TNT’s approach

to internal control over fnancial reporting be expec ted to prevent or detect all

misstatements, errors, raud or violation o law or regulations.



Annual report 2008

Board o Management compliance statem

chapt

In view o the above, the Board o Management believes that it is in compliance

with the requirements o II.1.4 o the Dutch corporate governance code taking

into account the most recent best practice provisions o the proposed revised

code.

In conjunction with the EU Transparency Directive as incorporated in chapter

5.3 o the Dutch Financial Markets Supervision Act (Wet op het fnancieel

toezicht ) the Board o Management thereore confrms to the best o its

knowledge that:

the annual fnancial sta tements or the year ended 31 December 2008 give a – true and air view o the assets, liabilities, fnancial position and proft and loss

o TNT and its consolidated companies,

the additional management inormation disclosed in the annual report gives –

a true and air view o TNT and its related companies as at 31 December

2008 and the state o aairs during the fnancial year to which the report

relates, and

the annual report describes the principal risks acing TNT. These are –

described in detail in chapter 13.

Hooddorp, 16 February 2009

Peter Bakker – Chie Executive Ofcer

Henk van Dalen – Chie Financial Ofcer

Harry Koorstra – General Managing Director Mail

Marie-Christine Lombard – General Managing Director Express



REMUNERATION

Annual report 2008

chapter 8 Remuneration 114

Remuneration committee 114

Current remuneration policy 114

Remuneration in 2008 116

Remuneration in 2009 118

Other 118

Remuner ation member s o the Supervisory Board 119



REMUNERATION


chapter 8

REMUNERATION

The frst part o this chapter outlines the remuneration policy with the

dierent compensation elements as approved by TNT’s annual general

meeting o shareholders on 20 April 2007. The second and third parts reect

the remuneration o the members o the Board o Management in 2008 and

2009 respectively. Finally, the remuneration o the members o the Supervisory

Board is described.

Remuneration committeeThe remuneration committee o the Supervisory Board is responsible or

assessing and preparing the remuneration policy or the members o the Board

o Management. The Supervisory Board approves the proposal and submits,

in case o policy changes, the proposed remuneration policy to the general

meeting o shareholders or adoption. In preparing the remuneration policy,

the remuneration committee also takes into account the remuneration

o the senior management reporting to the Board o Management. The

remuneration committee prepares its proposal independently ater careul

consideration, and taking into account the advice o independent advisors.

The remuneration policy is prepared in accordance with all relevant Dutch

legal requirements, is compliant with the Dutch corporate governance code,

and takes into account the recommendations o the Corporate Gover nance

Code Monitoring Committee.

The remuneration committee has our members. In 2008 the remuneration

committee members were Mr R.W.H. Stomberg (chairman and member until

11 April 2008), Mr S. Levy (chairman as o 11 April 2008), Mr R. King , Mr J.H. M.

Hommen, and Mr P.C. Klaver (member as o 11 April 2008). During 2008, the

remuneration committee met fve times. In 2008, none o the members o the

remuneration committee was a member o the management board o another

Dutch listed company or a member o the TNT audit committee.

The remuneration committee used proessional internal and external advice.

These advisors do not advise the members o the Board o Management

personally on their remuneration.

Current remuneration policy The remuneration policy’s objective is to attract, motivate and retain

qualifed members o the Board o Management o the highest calibre, with an

international mindset and background essential or the successul leadershipand eective management o a large global company. The members o the

Board o Management are rewarded accordingly and the largest part o their

remuneration is based on the per ormance o the company. The remuneration

structure or the Board o Management is thereore designed to balance short

term operational perormance with the long term objectives o the company

and value creation or its shareholders.

In order to consistently review the level and structures o the total remuneration,

the remuneration elements o the members o the Board o Management are

benchmarked against a Dutch reerence group. All comparisons are made on

a euro basis.

2008 Dutch peer group (AEX companies)

Unilever; Ahold; Philips Electronics; Akzo Nobel; KPN; Heineken; DSM ;Randstad; Reed Elsevier; Wolters Kluwer; ASML Holding; SBM oshore;USG people

The compensation o the members o the Board o Management contains three

elements:short term compensation, consisting o base salary and bonus opportunity, –

long term compensation, consisting o perormance shares, and –

pension. –

Short term compensation: base salary Base salary or the members o the Board o Management is set at median

level when compared to the peer group benchmark data. A check against the

peer data is perormed every two years. As a reerence or annual increases

a weighted average o collective labour agreement increases in TNT’s key

bussiness areas is taken.

Short term compensation: bonusIn accordance with the policy, the CEO receives an “at target” bonus opportunity

equal to 80% o his base salary and 120% or “stretch” perormance. The other

members o the Board o Management receive an “at target” bonus opportunity

equal to 70% o their base salary and 100% or “stretch” perormance.

The bonus scheme or the members o the Board o Management rewards

both fnancial perormance and mission related non-fnancial perormance. The

actual achievements between the minimum target level and the stretch target

level 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 o the bonus or non-fnancial perormance, no stretch

bonus level or sliding scale is used.

The Supervisory Board allocates the bonus based on the achievement o the

targets o the Board o Management and determines the associated pay-out.

The Supervisory Board sets the targets or the bonus scheme at the beginning o

each fnancial year. The ollowing fnancial and non-fnancial targets can apply:

Financial targets:earnings, –

revenue growth, –

economic proft, and –

cash ow. –

Depending on the tasks and responsibilities o each individual member o

the Board o Management, the fnancial targets are related to group and/or

divisional perormance.

Mission related non-fnancial targets:

general targets related to the implementation o TNT’s strategy, –



Annual report 2008

Remunera

chapt

exceeding customers’ expectations: continued improvements in TNT’s –

relations with customers, which are measured through customer satisaction

surveys and by assessing the relationship with its customers in person,

“instilling pride in our people”: continuous improvement in engaging TNT’s –

sta, which is measured through employee engagement surveys, and

sharing responsibility or the world, implementing the agreed standards on –

responsible corporate citizenship and realising other measurable targets in

relation to TNT’s CR ambitions.

The realisation o each fnancial or non-fnancial target can independently result in bonus payments. In 2008, 30% o the bonus opportunity at target level

related to non-fnancial targets.

TNT does not disclose the targets set, as this qualifes as commercially sensitive

inormation.

Long term compensation:

perormance sharesIn order to align the objectives o the Board o Management with the value-

creation objectives o the shareholders, members o the Board o Management

are awarded conditional rights on TNT shares under the TNT Perormance

Share Plan. The grant is based on a value o 80% o base salary or the CEO

and 65% o base salary or the other members o the Board o Management.

This grant value is translated into the 150% maximum number o shares that

are granted and can vest. This maximum number o shares is based on the IFRS

value per share as calculated on the basis o the average day-end share price o

TNT shares in the month o January o the year o the gr ant.

These perormance shares, due to their long term nature, are inherently and

signifcantly more open to market uncertainties than short term compensation

elements. The current Per ormance Share Plan vests ater a three-year period,

and the actual number o shares that can vest varies between 0% and the above

mentioned 150%. To determine the actual percentage, the Perormance Share

Plan vests against a perormance schedule in which the Total Shareholder

Return (TSR) o the company is compared to the total shareholder return

o peer group companies. This TSR peer group o companies consists o all

AEX companies and TNT’s direct competitors. The TSR is defned or this

purpose as the return to shareholders rom investing in shares, in terms o both

share price appreciation and dividends, assuming reinvestment o dividends.

The benchmark companies used or the purpose o TSR all have dierent

risk profles. TSR results are weighted against a risk actor to reect thesedierences in profles.

During the three-year vesting period, the TSR data and risk profles are

compiled and reported by an external data provider. Ater three years, the

fnal perormance o the company over the three years compared to the fnal

perormance o the peer group determines the number o shares to be vested.

The remuneration committee advises the Supervisory Board on the percentage

o perormance shares that vest: between 0% and 150% – vesting on the basis

o a sliding perormance scale using a perormance zone that r anges between

-20% and +20% TSR perormance in comparison to the TSR peer group.

The perormance schedule is designed in such a way that a TSR perormance o

the company at median level (hal o the companies in the peer group deliver a

higher TSR and hal o the companies deliver a lower TSR) leads to a vesting o

hal o the maximum allocation (150%) o granted rights on shares.

The value o the total o shares granted to the members o the Board o

Management under the Perormance Share Plan is benchmarked against

market practice, using the peer group as reerence, resulting in the grant

value o the perormance shares. This number o granted shares represents

150% o the “at target” base allocation, which was capped at a level o 37,275

shares or the CEO and 19,508 shares or the other member s o the Board o

Management in 2008.

Shares granted to the Board o Management via the Perormance Share Plan

are granted without fnancial consideration and must be retained or a period

o at least fve years ater grant being at least two years ater vesting or until at

least the end o employment, i this period is shorter. This is not necessary i it

can be demonstrated that their sale is prompted by required tax payments with

respect to these shares.

PensionThe pension scheme applicable to the Dutch members o the Board o

Management is a career average scheme. The main eatures o the career

average scheme are:

retirement age at 65, –

pensionable income is based on average annual base salary only, –

annual accrual rate or the old-age pension is 2.25%, –

oset or state pension at fscal minimum, –

benefts are indexed during accrual, and –

no employee contribution. –

Pension arrangements should be in line with local practice in the country

o residence o the member o the Board o Management. The pension

arrangements or all members o the Board o Management include entitlement

to a pension in the event o illness or disability and a spouse’s/dependant’s

pension on death.

% dierence company perormanceversus customised index

% o base allocation o perormance shares that vest

≥ + 20% 150.0%

+ 10% 112.5%+ 7% 100.0%

0% 75.0%

- 10% 37.5%

≤ - 20% 0.0%




Remuneration

chapter 8

Appointment details

Employed since Term o employment Board member since Year o (re)appointment Term o appointment

Peter Bakker October 1991 Indefnite 1998 2008 Four years

Henk van Dalen April 2006 Indefnite 2006 2006 Four yearsHarry Koorstra October 1991 Indefnite 2000 2005 Four years

Marie-Christine Lombard December 1999 Indefnite 2004 2008 Four years

Termination o the contractual arr angements o the Dutch members o the

Board o Management requires a notice period o six months.

The contractual severance payments or the members o the Board o

Management are summarised as ollows:

As policy, severance payments other than related to a change o control –

are one year base salary or a maximum o two years’ base salary in the frst

our-year term i one year is considered to be unreasonable.

Contracts entered into prior to 2004 remain unaltered. For members o –

the Board o Management who are not residents o the Netherlands, the

company ollows local market practice or that part o the base salary earned

in the country o residence. The employment contract o TNT’s CFO,

eective since 1 April 2006, st ates that the severance payments other than

related to a change o control will amount to twenty-our months base salar y

during the frst our year term as a member o the Board o Management.

During urther terms as a member o the Board o Management, the

severance payments are o twelve months salary.

Severance payments in case o a change o control equal the sum o the last –

annual base salary and pension contribution plus the average bonus received

over the last three years, multiplied by two. No distinction is made between

resident or non-resident members o the Board o Management.

For all members o the Board o Management, in case o a change o control o

the company, the Superviso ry Board may in its discretion allow all or part o the

allocations o perormance shares and/or matching shares to vest on the date

on which control o the company passes.

The company does not grant loans, including mortgage loans, to the members

o the Board o Management.

Compensation Board o Management

Base salary 2008

Other periodic paidcompensation 2008

Accrued or short term incentive

Accrued long term incentive

Pensionrelated costs

Peter Bakker 918,000 159,998 684,268 485,125 86,083

Henk van Dalen 612,000 525,459 361,052 212,617 254,816

Harry Koorstra 612,000 142,302 506,124 248,304 84,315

Marie-Christine Lombard 612,000 501,958 259,906 353,173 281,520

Total 2,754,000 1,329,717 1,811,350 1,299,219 706,734

(in €)

The amounts included in the columns accrued or short term incentive and

accrued or long term incentive represent the IFRS cost in 2008 o non-vested

entitlements relating to 2008 and previous years.

The CEO and the other members o the Board o Management will invest part

o their net 2008 bonus pay-out in TNT shares .

The compensation in cash received over the year 2008 consists o base salary

in the year and cash bonus over the year and paid in the year thereater. In anhistorical perspective this actual cash compensation has developed as ollows:

Members o the Board o Management

Remuneration in 2008TNT considers variable compensation to be an important part o the

remuneration package o the members o the Board o Management.

The table below summarises the 2008 compensation elements o the members

o the Board o Management as they have to be calculated under IFRS in the

annual accounts. For detailed disclosure on the remuneration o individual

member s o the Board o Management, see note 18 o the consolidated fnancial


reappointed or successive terms o our years each. Details on each member’s

appointment are set out below.

Members o the Board o Management are appointed or a period o our years.

On expiry o the our-year term, a member o the Board o Management may be



Annual report 2008

Remunera

chapt

Long term compensation: perormance shares

Perormance shares (in number o shares)

2004 2005 2006 2007 2008

Peter Bakker Granted shares 10,846 46,550 32,062 37,275 37,275

(capped) (capped)

o which vested 3 years thereater 10,846 29,094

Henk van Dalen Granted shares 16,032 19,508 19,508

(capped) (capped)

o which vested 3 years thereater

Harry Koorstra Granted shares 5,423 23,275 16,032 19,508 19,508

(capped) (capped)


Marie-Christine Lombard Granted shares 5,423 23,275 36,032 19,508 19,508

(capped) (capped)


Cash Compensation package Board o Management

2004 2005 2006 2007 2008

Peter Bakker Base salary 900,000 900,000 900,000 900,000 918,000

Bonus 675,000 498,140 675,000 675,000 587,795

(capped)

Henk van Dalen Base salary 450,000 600,000 612,000

Bonus 378,0001 450,000 336,784

(capped)

Harry Koorstra Base salary 600,000 600,000 600,000 600,000 612,000

Bonus 450,000 364,465 450,000 450,000 439,722

(capped)

Marie-Christine Lombard Base salary 500,000 600,000 600,000 600,000 612,000

Bonus 375,000 514,465 450,000 450,000 195,840

(capped)

(in €)1 – Pro rata or months employed in 2006




Remuneration

chapter 8

Remuneration in 2009Given the severe economic environment, the related public debate on top

management remuneration and the sacrifces that all stakeholders will be

asked to make during this economic crisis period, the Super visory Board has

extensively discussed the Board o Management remuneration or 2009.

Notwithstanding the 2007 approved remuneration policy the remuneration

committee has advised the Superv isory Board the ollowing measures or 2009:

no salary increase shall be made eective as regards the base salary. –

Thereore the base salary o the CEO remains set at €918,000, and or the

other member s o the Board o Management it remains set at €612,00 0.

a cap on short term incentive is to be implemented. For the CEO the cap is –

set at €460,000 and or the other members o the Board o Management it

is set at €325,000.

a cap on long term incentive is to be implemented. The cap or the CEO is –

set at a grant value o €460,000 and or the other members o the Board o

Management it is set at a grant value o €325,000.

The Supervisory Board has approved this recommendation. The Board o

Management concurs with this decision. For 2009 this means the CEO’s

remuneration is between 25% (at target) and 35% (at stretch) below the 2007approved policy levels. For the other members o the Board o Management

total remuneration is decreased by between 15% (at target) and 24% (at

stretch) compared to the 2007 approved policy levels.

Compared to the 2008 level the total o base salary and short term

compensation bonus opportunity decreases by €215,000 or the CEO and by

€125,00 0 or the other members o the Board o Management .

During the course o 2009 the Supervisory Board will work on a new policy that

is simpler, aimed at the long term interest o all stakeholders and benchmarked

towards market developments in TNT’s peer and reerence group.

Other The Supervisory Board introduced a “claw-back” clause, eective as o 2008,

in the situation that the fnancial inormation on which the pay-out o variable

remuneration was based is determined to be incorrect.

In case o a change o control, the proceeds o the 2009 perormance share

grant will be capped at the level o the sum o:

the average o the closing prices o the TNT N.V. share according to the –

Ofcial Pr ice List or a period o fve trading days prior to the date o the time

the frst announcement to make a public oer was made, and

50% o the dierence between the ultimate share price paid by the buyer –

and the price as calculated under the previous bullet.

The Supervisory Board has the discretionary authority to decide on one-o

payments to members o the Board o Management in special circumstances.

Such payments are always explained and disclosed.

The Supervisory Board has the discretionary authority to adjust the value o

variable pay components originally awarded i the outcome proves to be unair

as a result o exceptional circumstances during the perormance period.

Comparison value o granted shares between IFRS and the public domain

maximum number o shares granted in 2008

value assumed by publicdomain at grant date

total valueunder IFRS

number o shares as i vested per 31 Dec 2008

value as i vestedper 31 Dec 2008

CEO 37,275 930,011 407,043 7,331 100,875

Member o the Boardo Management 19,508 486,725 213,027 3,837 52,797

(in €, except number o shares)

Explanation on long term

compensationA perormance share grant is oten wrongully calculated as ull income at the

moment o grant by multiplying the maximum number o shares times the

share price on the date o grant. Due to the three-year vesting period and

the intrinsic uncertainty o the outcome o the perormance schedule and the

other conditions to be met, the vested value can be signifcantly dierent. This is

illustrated by the table below which includes the IFRS value o the per ormance

shares granted in 2008, compared with the hypothetical value assuming

vesting per 31 December 2008. At this date the pro orma number o shares

vesting would then have been 29.5% o the base allocation. Both values dier

signifcantly rom calculations as oten used in the public domain (please also

reer to note 18 o the consolidated fnancial st atements o TNT N.V).



Annual report 2008

Remunera

chapt

Remuneration o Supervisory Board

Base fee

Chairman 60,000

Member 45,000

Committees Meeting fee

Audit & Remuneration Chairman 2,500

Member 1,500

Nomina tions & Pub li c Aa ir s Chai rman 1,500

Member 1,000(in €)

Remuneration members o the Supervisory Board

The remuneration o the members o the Supervisory Board comprises base

compensation and variable compensation linked to attendance o the meetings

o the committees o the Supervisory Board. The members o the Supervisory

Board do not receive any compensation related to perormance and/or equity

and do not accrue any pension rights with the company. The members o

the Supervisory Board do not receive any severance payment in the evento termination. TNT does not grant loans, including mortgage loans, to any

member o the Supervisory Board. The remuneration o the Supervisory Board

has not changed since 2006.



REPORT OF THESUPERVISORY BOARD

Annual report 2008

chapter 9 Report o the Supervisory Board 122

Composition o the Supervisory Board 122

Members o the Supervisory Board 122

Committees o the Supervisory Board 123

Induction and training 125

Meetings o the Supervisory Board 125

Strategy 125

Risks 126

Meetings o the committees 126Independence o members o the Supervisory Board 127

Diversity within the Supervisory Board 127

Compliance 127

Financial statements 127





chapter 9


In this chapter the Supervisory Board o TNT reports on its activities in 2008

and on the inormation it is required to provide under the Dutch corporate

governance code (published December 2003).

Composition o theSupervisory BoardThe Supervisory Board should consist o a minimum o seven and a maximum

o twelve members. The Supervisory Board determines the number o its

members. At present, TNT ’s Supervisory Board consists o ten members.

The Supervisory Board has prepared a profle o its size and composition,

taking account o the nature o TNT’s business and activities and the desired

expertise and background o the members o the Supervisory Board. The

Supervisory Board evaluates the profle annually and discusses the profle with

the general meeting o shareholders and TNT’s central works council when any

amendments to the profle are made.

According to the by-laws and the profle o the Supervisory Board, a person

may be appointed to the Supervisory Board or a maximum o three terms

o our years. Also, TNT’s articles o association provide that members o

the Supervisory Board shall retire periodically in accordance with a rotation

plan drawn up by the Supervisory Board in order to avoid, as ar as possible, a

situation in which appointments and/or reappointments occur simultaneously.

Both profle and rotation plan can be viewed on TNT’s corporate website,

group.tnt.com.

In accordance with the Dutch corporate governance code, it is the intention

o the Supervisory Board that its members will not hold more than fve

memberships in supervisory boards o Dutch listed companies (including TNT).

In this respect, a chairmanship counts twice.

The composition o the Supervisory Board changed in 2008. At the annual

general meeting o shareholders held on 11 April 2008, Messrs R. Dahan and

R.W.H. Stomberg announced their resignation as members o the Supervisory

Board. Mr Dahan’s resignation became eec tive on 1 June 2008. He had been a

member o the Supervisory Board since 1 April 2003. Mr Stomberg’s resignation

became eective on 11 April 2008. He had been a member o the Supervisory

Board since 1998. The Supervisory Board is grateul or the advice, wisdom and

dedication o Mr Dahan and Mr Stomberg as members o the Supervisory Board.

Mr R.J.N. Abrahamsen was reappointed by the annual general meeting o

shareholders o 11 April 2008 or an additional our year term.

Mr J.H.M. Hommen, due or reappointment in 2009, stepped down as

chairman o the Supervisory Board on 31 December 2008. Mr Hommen

will step down as a member o the Supervisory Board at the annual general

meeting o shareholders o 8 April 2009. Mr Hommen has been a member o

the Supervisory Board since 1998.

Mr P.C. Klaver, ormer chairman o the Executive Board o SHV Holdings N.V.,

was appointed as a member o the Supervisory Board by the annual general

meeting o shareholders o 11 April 2008. Mr Klaver took over the position o

chairman o the Supervisory Board on 1 January 2009. Mr Klaver has become

a member o the public aairs committee and the remuneration committee,

and becomes a member o the nominations commit tee in February 2009. As an

observer, he regularly attends the meetings o the audit committee and used to

attend in that capacity the meetings o the nominations committee.

The position o vice-chairman o the Super visory Board, previously ulflled by

Mr J. Cochrane , is ulflled by Mr S. Levy as o 1 January 2009.

Mr G.J. Ruizendaal, member o the Group Management Committee o Royal

Philips Electronics N.V., was appointed as a member o the Supervisory Boardby the annual general meeting o shareholders o 11 April 2008. Next to his

membership o the Supervisory Board, Mr Ruizendaal has become a member

o the audit committee.

Ms G. Kampouri Monnas and Mr Levy are due or reappointment in 2009. Ms

Kampouri Monnas will not put hersel up or nomination or another term as

member o the Supervisory Board.

Ms P.M. Altenburg has been nominated as new member o the Supervisory

Board. Her appointment will be decided on by the annual general meeting o

shareholders o 8 April 2009.

The changes in positions were discussed as part o the succession policy o its

members by the Supervisory Board and also in relation to the profle o the

Supervisory Board. Some amendments to the profle were made. The new

profle can be ound on TNT’s corporate website.

Members o theSupervisory Board J.H.M. (Jan) Hommen (1943)Mr Hommen was appointed as a member o the Supervisory Board on 28

June 1998. He was chairman o the Supervisory Board rom April 2005 until

end o December 2008. His current term as a member o the Supervisory

Board expires in 2009. Mr Hommen will not be available or reappointment.

Mr Hommen is chairman o the super visory boards o ING Group N.V., Reed

Elsevier N.V. and the Academic Hospital o Maastricht. He is a member o the

supervisory board o Royal Friesland Campina N.V. and chairman o the board

o directors o TiasNimbas Business School o Tilburg University. Mr Hommen

was ormerly vice-chairman o the board o management and chie fnancialofcer o Royal Philips Electronics N.V., executive vice-president and chie

fnancial ofcer o the Aluminium Company o America (Alcoa), and member

o the supervisory board o Royal Ahold N.V. Mr Hommen was appointed to

act as chairman o the super visory board o ING Group N .V. on 1 January 2008.

From January 2008 until 31 December 2008 Mr Hommen had more than fve

board memberships. This was approved by the Supervisory Board in view o

the act that Mr Hommen planned to step down as chairman o the Super visory

Board as soon as Mr Klaver was ready to take over the position o chairman.

Mr Hommen will resign as a member o the Supervisory Board at the annual

general meeting o shareholders in 2009, when his third term expires. See also

chapter 10 under Dutch corporate governance code.



Annual report 2008

Report of the Supervisory B

chapt

P.C. (Piet) Klaver (1945)Mr Klaver was appointed as a member o the Supervisory Board on 11 April

2008. His current term expires in 2012. He is chairman o the Supervisory

Board as o 1 January 2009. Mr. Klaver is chairman o the supervisory boards

o the Utrecht School o Arts, Dekker Hout Groep B.V., Jaarbeurs Holding B.V.

and Credit Yard Group B.V. Furthermore, he is a member o the supervisory

boards o ING Group N.V., SHV Holdings N.V., Dura Vermeer Groep N.V. and

Arican Parks Foundation. Formerly, Mr Klaver held various positions at SHV

Holdings N.V., lastly a s chairman o the Executive Board o Directors.

S. (Shemaya) Levy (1947)Mr Levy was appointed as a member o the Supervisory Board on 7 April 2005.

His current term expires in 2009. He is vice-chairman o the Supervisory Board

as o 1 January 2009. Mr Levy is a member o the supervisory boards o Nissan,

Renault Spain, Sar an, Segula Technologies and AEGON N.V. Formerly, Mr Levy

was chie executive ofcer o Renault Industrial Vehicles Division and executive

vice-president and chie fnancial ofcer o Renault Group.

R.J.N. (Robert) Abrahamsen (1938)Mr Abrahamsen was appointed as a member o the Supervisory Board on 9

May 2000. His current term expire s in 2012. Mr Abrahamsen is chairman o the

supervisory boards o Optimix Vermogensbeheer N.V. and Trans Link Systems.

Mr Abrahamsen is a member o the supervisory boards o Fluor Daniel B.V.,

PON Holdings B.V., Havenbedrij Rotterdam B.V., ANP, Madurodam B.V.,

Royal BAM Group, Vitens N.V., and Bank Nederlandse Gemeenten. He was

a member o the management board and chie fnancial ofcer o KLM Royal

Dutch Airlines N.V. and was senior executive vice-president o ABN AMRO

Bank N.V.

V. (Victor) Halberstadt (1939)Mr Halberstadt was appointed as a member o the Supervisory Board on

28 June 1998. His current term expires in 2010. Mr Halberstadt is proessor

o public fnance at Leiden University, international advisor o Goldman

Sachs Group Inc., and non-executive director o PA Consulting Group Ltd.

Furthermore, he is a member o the supervisory board o Het Concertgebouw

N.V. Mr Halbers tadt previously served among other things as president o the

International Institute o Public Finance, Crown-member o the Social and

Economic Council, chairman o the Daimler Chrysler international advisory

board and member o the supervisory board o Royal KPN N.V.

M.E. (Mary) Harris (1966)Ms Harris was appointed as a member o the Supervisory Board on 20 April

2007. Her current term expires in 2011. From 1994 to 2006, Ms Harris held anumber o positions at McKinsey & Company in London, China, South-east Asia

and Amsterdam. Previously, Ms Harris held positions at media venture capital

frm Maxwell Enter tainment Group, Pepsi Cola Beverages, and Goldman Sachs

& Co. Ms Harris is a non-executive director at J . Sainsbury plc, a member o

the supervisory board o Unibail-Rodamco S.A . and a member o the advisory

board o Irdeto B .V.

G. (Giovanna) Kampouri Monnas (1955)Ms Kampouri Monnas was appointed as a member o the Supervisory Board

on 7 April 2005. Her current term expires in 2009. Ms Kampouri Monnas is a

member o the supervisory board o Rands tad Holding N.V. and member o the

board o directors o Puig SL. Formerly, she was president o the international

division and member o the executive committee o Johann Benckiser GmbH

and held various positions at Procter & Gamble in Greece and the United

States. Prior to this, Ms Kampouri Monnas was urban development consultant

or the Greek Ministry o Economic Aairs.

R. (Roger) King (1940)Mr King was appointed as a member o the Supervisory Board on 20 April

2006. His current term expires in 2010. Mr King is non-executive director o

Arrow Electronics, Inc. (USA) and Orient Overseas International Limited

(Hong Kong). He is a standing committee member o the Chinese People’s

Consultative Conerence o Zhijiang Provincial Committee and serves on

various business and community committees. Mr King is Adjunct Proessor atHong Kong University o Science and Technology. He is ormer president and

chie executive ofcer o Sa Sa International Holdings Limited, ormer chairman

and chie executive ofcer o ODS System-Pro Holdings Limited (Hong Kong),

part o the CY Tung Group o Companies , and was managing director and chie

operating ofcer o Orient Overseas International Limited.

W. (Wim) Kok (1938)Mr Kok was appointed as a member o the Supervisory Board on 1 April 2003.

His current term expires in 2011. Mr Kok is a non-executive director o Royal

Dutch Shell plc and member o the supervisory boards o ING Group N.V.

and KLM Royal Dutch Airlines N.V. Furthermore, Mr Kok is the chairman o

the board o trustees o the National Ballet and the Antoni van Leeuwenhoek

Hospital “Netherlands Cancer Institute”. He is a member o the board

o trustees o Het Muziektheater, member o the board o Stichting Start

Foundation, and chairman o the Anne Frank Foundation. Mr Kok was ormerly

Prime Minister o the Netherlands, Minister o Finance, Member o Parliament,

chairman o the Conederation o Dutch Trade Unions and the European

Trade Union Conederation, and vice-chairman o the board o trustees o the

Rijksmuseum.

G.J . (Gerard) Ruizendaal (1958)Mr Ruizendaal was appointed as a member o the Supervisory Board on 11

April 2008. His current term expires in 2012. Mr Ruizendaal is a member o

the group management committee o Royal Philips Electronics N.V. He held

various positions at Philips, among other things as group controller, and was

vice-chairman o the supervisory board and member o the audit committee

o Atos Origin.

Committees o the

Supervisory BoardTNT’s Supervisory Board has ormed an audit committee, a remuneration

committee, a nominations committee and a public aairs committee rom

among its members. The committees operate pur suant to terms o reerence

established by the Supervisory Board according to the rules and regulations

o the Dutch corporate governance code. The terms o reerence o these

committees can be viewed on TNT’s corporate website.




Report of the Supervisory Board

chapter 9

Audit committeeThe audit committee is charged with assisting the Supervisory Board in advising

on and monitoring, inter alia, the integrity o TNT ’s fnancial statements, system

o internal business control and risk management, fnancing and fnance-related

strategies and tax planning. The audit committee has the authority to retain

independent advisors as it deems appropriate. TNT will bear these costs.

The audit committee consists o at least three members. All members o

the audit committee must be members o the Supervisory Board who are

determined by the Supervisory Board to be independent within the meaningo its by-laws and the applicable corporate governance rules. A member o the

audit committee may not simultaneously serve on the audit committees o

more than two other companies unless the Supervisory Board determines that

this simultaneous service would not impair the ability o such member to serve

eectively on the audit committee. The audit committee and the remuneration

committee may not consist o the same members.

Each member o the audit committee must be fnancially literate and at least

one member o the audit committee must have accounting or related fnancial

management expertise.

Remuneration committeeThe remuneration committee is appointed by the Supervisory Board

to propose the remuneration o the individual members o the Board o

Management or adoption by the Supervisory Board. The remuneration

committee also proposes a remuneration policy, including schemes under

which rights to shares are granted, or members o the Board o Management,

and prepares a proposal or the remuneration o the individual members o the

Supervisory Board, both or adoption by the gener al meeting o shareholders.

Furthermore, the remuneration committee prepares the allocation by the

CEO ater approval by the Super visory Board o rights to shares in TNT’s share

capital to other senior management within TNT.

Nominations committeeThe nominations committee is appointed by the Supervisory Board to draw up

selection criteria and appointment procedures or members o the Supervisory

Board and members o the Board o Management, to set up procedures tosecure adequate succession o members o the Board o Management and the

assessment o such candidates, and to assess the size and composition o the

Supervisory Board and the Board o Management. It makes proposals or the

profle o the Supervisory Board, assesses the unctioning o individual members

o the Supervisory Board and the Board o Management and reports this to

the Supervisory Board. Finally, the nominations committee makes proposals

or nominations, appointments and reappointments. At least annually the size

and composition o the Supervisory Board and the Board o Management and

the unctioning o the individual members are assessed by the nominations

committee.

Public aairs committeeThe public aairs committee is appointed by the Supervisory Board to act

as a sounding board and advisory committee or the Board o Management

with respect to (i) ormulating, developing and monitoring TNT’s public aairs

policy, governing the relationships between TNT and national and international

(semi) public bodies, and (ii) ormulating, developing, monitoring and reporting

on TNT’s social and environmental policies.

Composition o Supervisory Board committees as per 1 January 2009

Name Nationality Appointed Term expires Committee membership

Mr J.H.M. Hommen Dutch June 1998 2009 Nominations (chair), remuneration

Mr P. C. Klaver Dutch April 2008 2012 Remuneration, public aairs

Mr S. Levy French April 2005 2009 Remuneration (chair)

Mr R.J.N. Abrahamsen Dutch May 2000 2012 Audit (chair) , nominations

Mr V. Halberstadt Dutch June 1998 2010 Public aairs (chair), nominations

Ms M.E. Harris British April 2007 2011 Audit

Ms G. Kampouri Monnas Greek April 2005 2009 Audit, public aairs

Mr R. King American April 2006 2010 Remuneration

Mr W. Kok Dutch April 2003 2011 Nominations, public aairs

Mr G.J. Ruizendaal Dutch April 2008 2012 Audit



Annual report 2008


chapt

Chairman and corporate secretary The chairman o TNT’s Supervisory Board determines the agenda and

presides over meetings o the Supervisory Board. The chairman is responsible

or the proper unctioning o TNT’s Supervisory Board and its committees.

Furthermore, the chairman arranges or the induction and training programme

or the members o TNT’s Supervisory Board and initiates the evaluation o

the perormance o the members o the Super visory Board and the Board o

Management.

The chairman o TNT’s Supervisory Board may not be a ormer member o

TNT’s Board o Management.

TNT’s Supervisory Board is assisted by TNT’s corporate secretary. All

members o the Supervisory Board have access to the advice and services o

the corporate secretary, who is responsible or ensuring that Supervisory Board

procedures are ollowed and that the Supervisory Board acts in accordance

with its statutory obligations under the articles o association. The corporate

secretary is appointed and dismissed by the Board o Management, ater the

approval o the Supervisory Board has been obtained.

At TNT, the corporate secretary has been appointed as secretary to the

Board o Management and the Supervisory Board and as compliance ofcer as

mentioned in the TNT Group Policy on Inside Inormation.

There is an agreed procedure or members o the Supervisory Board to obtain

independent proessional advice at TNT’s expense, i so required.

Induction and trainingAs new members o the Supervisory Board, Mr Klaver and Mr Ruizendaal attended

a ull-day induction programme on 20 May 2008. Senior corporate directors

inormed them o the strategic, fnancial, legal and reporting aairs o TNT. Mr

Klaver and Mr Ruizendaal also visited TNT Post acilities. Several members o the

Supervisory Board attended a conerence on general board issues as well as an

in-house meeting on aspects o the recommendations issued by the Corporate

Governance Code Monitoring Committee in its repor t o 4 June 2008.

Meetings o the

Supervisory BoardIn 2008, the Supervisor y Board held fve meetings, with the Board o Management

present as well. The Super visory Board also held fve evening meetings, o which

three were attended by the ull Board o Management. Two o the evening

sessions were concluded with private sessions o the Supervisory Board with

no members o the Board o Management present. The chairman had requent

meetings with the CEO, and rom time to time wi th other member s o the Board

o Management, in between the Supervisory Board meetings.

The Supervisory Board held a number o meetings by telephone. Most meetings

were attended by the ull Supervisory Board. There was no requent absence o

any o the members o the Supervisory Board.

In February, the Super visory Board approved the remuneration o the Board o

Management over 2007 as well as the targets or the Board o Management or

2008. The establishment o a claw-back clause under specifc circumstances and

a specifc cap on the 2008 remuneration in case o a take-over or liquidation

o the company were approved. The Supervisory Board approved TNT’s

fnancial statements and 2007 ull year dividend. The management letter by

TNT’s auditors, PricewaterhouseCoopers Accountants N.V., and the 2007

social responsibility report were discussed. The 2007 annual report, t he TNT

Reserve and Dividend Guidelines 2008, the cancellation o shares purchased by

TNT under the share buy-back programme announced on 30 July 2007 and theagenda or TNT’s annual general meeting o shareholder s o 11 April 2008 were

approved. An update on the integrity programme (including the 2007 raud and

whistleblower report) was provided.

In April, the Supervisor y Board reappointed Mr Bakker as chairman o the Board

o Management and Ms Lombard as member o the Board o Management, both

or another our year term. The nomination or reappointment o Mr Abrahamsen

and the nomination or appointment o Messrs Klaver and Ruizendaal as members

o the Supervisory Board per 11 April 2008 were approved.

In June, the Supervisory Board held the annual strategy meeting together with

the Board o Management, reviewing both the business strategies o the Mail and

Express divisions as well as the group strategies, including fnancial strategies .

In July, the Supervisory Board approved the 2008 interim dividend and the 2008

fnancing plan. The health and saety repor ting was discussed. An update on

the integrity programme (including the interim 2008 raud and whistleblower

report) was provided.

In October, the third quarter results were discussed. The worsening fnancial

and economic situation and the impact thereo on TNT and on TNT’s pension

unds were discussed.

In December, the Supervisory Board discussed the 2008 preliminary budget

plan with the Board o Management. The new corporate responsibility strategy

or 2009 onwards was discussed as well as the results o the engagement survey

which was held in October. Also, a possible strategic partnership with Royal

Mail was discussed.

In the December evening meeting, the Supervisory Board evaluated with

the CEO the unctioning o the Board o Management and its individual

members. Subsequently, the Supervisory Board discussed in a pr ivate session

the unctioning o the CEO, and, based on elaborate sel-assessment, its ownunctioning, its profle, composition and competence and the unctioning o its

committees.

Strategy In June, the Supervisor y Board together with the Board o Management discussed

the 2008-2012 strategy. In December 2007, TNT concluded the frst phase o

its Focus on Networks strategy originally announced in the ourth quarter o

2005, which strategy entails a ocus on providing delivery solutions by expertly

managing delivery networks. Execution o the second phase o the Focus on

Network s strategy, Grow and Build Value, started in December 2007.




Report of the Supervisory Board

chapter 9

With the start o this phase, the Supervisory Board and the Board o Management

discussed the emphasis or the coming period on cost optimisation in the air and

road networks o the Express division. The Supervisory Board acknowledged

this emphasis. In the Mail division the ocus was on maintaining market share

in the Netherlands and capturing growth opportunities outside TNT’s home

market. In 2008, TNT Post launched cost savings initiatives that are currently

under negotiation with the trade unions. Throughout the year several strategy

updates were given by the Board o Management to the Supervisory Board.

RisksTNT’s risk management process is described in chapter 7 and the risks currently

acing TNT’s strategic, operational, legal and regulatory compliance and fnancial

objectives are outlined in chapter 13. The outcome o the risk management

process is shared and discussed with the audit committee o the Supervisory

Board and the Supervisory Board.

Meetings o the committees

Audit committeeIn 2008, the audit committee met fve times. All meetings were attended by

the CFO, three o the mee tings were attended by the CEO, and all meetings

were attended by the group director Internal Audit, the group director

Financial Reporting Consolidation and Accounting and the external auditor

PricewaterhouseCoopers Accountants N.V. Four meetings were attended by

the group director Business Control.

The audit committee discussed with TNT’s ex ternal auditor the ull year 2007

and hal-year 2008 management letters as well as TNT’s 2007 annual results

and the 2008 frst quar ter, hal-year and third quarter results. It also reviewed

press releases and related analyst presentations and compliance with TNT’s

Group Policy on Auditor Independence & Pre-Approval, as well as internal

control over fnancial reporting. The reports o TNT’s internal audit unction

were discussed each quarter. The audit committee urther reviewed the TNT

Reserves and Dividend Guidelines 2008 and proposals or the 2007 ull year

dividend and the 2008 interim dividend.

In February, the risk management process was reviewed. The audit plan 2008was discussed with PricewaterhouseCoopers Accountants N.V. and the audit

ee proposal or 2008 approved. In December, the audit committee r eviewed

the preliminary budget plan 2009 and internal audit plan 2009. The SUN

project, which comprises key initiatives to optimise the fscal, legal, accounting

and treasury struc ture o the organisation and its subsidiaries, was discussed.

The 2008 fnancing plan, including the issuance o a 10 year bond or an amount

o €568 million, was discussed and approved. The impact o the credit squeeze

on TNT’s fnancial position and on the position o the pension und’s coverage

ratio was discussed.

Remuneration committeeIn 2008, the remuneration committee held fve meetings. The remuneration

committee is responsible or assessing and preparing the remuneration policy

applicable to the members o the Board o Management. In the course o 2008,

the remuneration committee reviewed the current short term incentive plan

and the long term incentive plan. The review has not resulted in a policy change.

See chapter 8 or urther details on remuneration or the Board o Management

and the Supervisory Board, including a urther explanation o the remuneration

policy and actual remuneration and the relation between remuneration andperormance o members o the Board o Management or 2008.

Nominations committeeThe nominations committee held fve meetings in 2008. The Supervisory

Board (re)appointments were discussed as well as the reappointments o Mr

Bakker and Ms Lombard to the Board o Management. The outside positions

o the members o the Board o Management were discussed. The vacancies

in the Supervisory Board or 2009 were discussed as well as the composition

o the committees o the Supervisory Board. The profle o the Supervisory

Board was discussed and the aspect o diversity in the composition o the

Supervisory Board.

Public aairs committeeThe public aairs committee met seven times in 2008. The committee

discussed national and international postal regulatory developments, including

the proposed new Dutch postal law and the status and various related subjects

o the liberalisation o the European postal market. The committee reviewed

TNT’s 2007 corporate responsibility report and the proposed new corporate

responsibility strategy or 2009 onwards. The committee reviewed and

discussed the cost savings initiatives or the Dutch mail operations (the Master

Plans), health and saety issues (including atalit ies) and Planet Me initiat ives. The

negotiations with the labour unions on the new collective labour agreement

were discussed as well as the collective labour agreement or the postal sector.

From October onwards, also specifc Express issues, like or example landing

rights and regulatory ramework within which Express operates in Europe,

were included on the agenda o the committee.

Reporting by committeesEach committee repor ted its fndings and conclusions on a regular basis, both

verbally and in writing, to the ull Supervisory Board. Minutes o the auditcommittee meetings were prepared over-night, being available in drat to

the ull Supervisory Board the nex t morning prior to the regular Supervisory

Board meeting.



Annual report 2008


chapt

Independence o memberso the Supervisory BoardThe Supervisory Board confrms that all members o the Supervisory Board

are independent in the sense o best practice provision III.2.2 o the Dutch

corporate governance code.

Diversity within theSupervisory BoardOn 4 June 2008, the Corporate Governance Code Monitoring Committee

issued an advisory report with inter alia recommendations on diversity in

the composition o supervisory boards o companies listed on Euronext

Amsterdam. The Supervisory Board support s the recommendations made by

the Corporate Governance Code Monitoring Committee and will apply them

wherever possible and easible.

TNT adheres to best practice III.1.3 o the Dutch corporate governance code,

which states that inormation must be given in the annual report on the members

o the Supervisory Board themselves. Further to the recommendations o the

Corporate Governance Code Monitoring Committee, the Supervisory Board

has explicitly included in the inormation given on its members the number o

women in the Supervisory Board together with inormation on nationality, age,

expertise and social background.

The Supervisory Board consists o ten members. O these ten members, two

are emale (20%). With respect to nationality, 40% o the board members are

non-Dutch. Five nationalities are represented. The average age is 61; the ages

range between 42 and 70.

All members have a university degree or the equivalent thereo. The feld o

expertise ranges rom (public) fnance to members who are experienced in

consultancy and marketing to members who have general management

experience in the United States, the Far East and/or Europe.

The profle o the Supervisory Board is such that each member must be capable

o assessing the broad outline o the overall policy and should have the specifc

expertise required or the ulflment o the du ties assigned to the role designated

to him or her within the ramework o the profle. Each member should havesufcient time available or the proper perormance o his or her duties. The

Supervisory Board has ensured the composition o its board to ft the profle

and thus to be as independent and diverse as possible. The Supervisory Board

eels the quality o its unctioning has greatly beneftted rom this approach.

ComplianceThe Supervisory Board confrms that in 2008 no decisions were taken by the

Supervisory Board that did not comply with its by-laws.


This annual report and the 2008 consolidated fnancial statements, audited by PricewaterhouseCoopers Accountants N.V., were presented to the Supervisory

Board in the presence o the Board o Management and the external auditor.

PricewaterhouseCoopers Accountants N.V.’s report can be ound on page 107

o chapter 6.

The members o the Supervisory Board have signed the fnancial statements

pursuant to their statutory obligation under article 2:101(2) o the Dutch Civil

Code. The members o the Board o Management have signed the fnancial

statements pursuant to their statutory obligation under article 2:101(2) o the

Dutch Civil Code and article 5:25c (2)(c) o the Financial Markets Supervision

Act (Wet op het fnancieel toezicht ). See also chapter 7 on page 112.

The Supervisory Board recommends that the gener al meeting o shareholders

adopts the 2008 consolidated fnancial statements o TNT. The annual general

meeting o shareholders will be asked to release the members o the Board

o Management and o the Supervisory Board rom liability or the exercise o

their duties. The appropriation o proft approved by the Supervisory Board

can be ound on page 107.

The Supervisory Board endorsed TNT’s Board o Management’s view on 2009

as to the development o the economic environment not to substantively

improve over the severe 2008 downturn in economic and fnancial

circumstances. The Supervisory Board thereore approved the decison o the

Board o Management to propose a dividend over 2008 at €34 cents per share

which was already paid as an interim dividend in cash in 2008.

In addition, the Supervisory Board approved the decision by the Board o

Management to propose to the annual general meeting o shareholders a

distribution o a stock dividend to be paid out o distributable reser ves o one

share or every 40 shares, which based on the volume weighted average share

price o 11 - 13 Februar y 2009 (€14.66) equals €37 cent s per share .

The Supervisory Board wishes to thank the Board o Management and all

employees o TNT or their outstanding contributions in 2008.

Supervisory Board –

Hooddorp, 16 February 2009



GOVERNANCE,REGULATION, INVESTOR

RELATIONS AND RISKSAnnual report 2008

chapter 10 Corporate governance 130

General 130

Board o Management 130

Super visory Board 131

Conict o interes t o Board member s 132

Securi ties owned by Board member s 132

Shareholders and their rights 133

Foundation Protec tion TNT and preerence shares B 134

Dividend in TNT 135Corpora te events in 2008 135

Auditor 136

Dutch corporate governance code 136

chapter 11 Regulatory environment 138

Mail serv ices 138

Express services 140

Customs regulation 140

Public procurement 141

Competi tion law 141

chapter 12 Investor relations, shares, dividend and shareholder returns 142

General 142

Dividend TNT 143

Share capital and shares 143

Repurcha se o shares/share buy-back programmes 143

Major shareholders 144

Other inormation 144

chapter 13 Risks 147

Risk environment and response 2008/2009 147

Principal key risks 147

Additional specifc and inherent key risks 149




chapter 10

CORPORATEGOVERNANCE

GeneralPursuant to the Enabling Act as currently in orce, TNT is subject to the ull

Dutch large company regime. Under these rules, TNT is required to adopt a

two-tier system o corporate governance, comprising a board o management

entrusted with the executive management under the supervision o an

independent supervisory board. Both the supervisory board and the board o

management are accountable to the general meeting o shareholders or the

perormance o their duties.

Under the ull large company regime, member s o the board o management

are appointed and can be suspended or dismissed by the supervisory board.

The decision o the supervisory board to dismiss a member o the board o

management can only be taken ater the general meeting o shareholders has

been consulted on the intended dismissal. Further, under these r ules certain

resolutions o the board o management require the prior approval o the

supervisory board.

TNT has taken notice o the revised Dutch corporate governance code

published by the Corporate Governance Code Monitoring Committee on 10

December 2008 (the “revised Code”). TNT is currently studying the revised

Code. TNT will apply the principles and best practices o the revised Code in

the fnancial year 2009 and will report on how it complied with these principles

and best practices in the annual report over the fnancial year 2009. In this

2008 annual report the principles and best pr actices o the Dutch corporate

governance code published in December 2003 are repor ted on, including the

good practice recommendations published by the Corporate Governance

Code Monitoring Committee in its subsequent repor ts until December 2008.

Unless stated otherwise, reerence in this annual repor t to the Dutch corporate

governance code shall mean reerence to the Dutch corporate governance

code as published in December 2003.

Board o ManagementThe Board o Management oversees TNT in its entirety, is responsible or

setting TNT’s mission, vision and strategy and its implementation, and takes

responsibility or TNT’s overall results. At present, the Board o Management

consists o our members: the CEO, the CFO and the two group managing

directors o the Mail and Express divisions.

The group managing director o each o TNT’s two divisions is primarily responsible or the development and execution o the business strategy and

operations o the division within the ramework set by TNT’s corporate s trategy.

The Board o Management is collectively responsible or the management o

TNT as a company and or all decisions taken in this respect.

TNT’s reporting structure is in line with the management structure o the two

divisions.

Duties o the Board o ManagementIn perorming its duties, the Board o Management acts in accordance with

the interests o TNT and the business connected with it and, to that end, is

required to consider all appropriate interests associated with the company.

The Board o Management is frmly commit ted to managing the company in a

structured and tr ansparent ashion. TNT’s aim is to provide stakeholders with

a clear view on corporate decisions and decision-making processes. Value-

based management provides TNT with an additional ramework or orward-

looking management o the company based on objective criteria. Day-to-day

decisions in the divisions are decentralised within established standards,

processes, requirements and guidelines.

TNT’s Board o Management is responsible or complying with all relevant

legislation and regulations, or managing the risks associated with TNT’s

activities, or its fnancing, and or its ex ternal communications. TNT’s Board

o 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 audit committee.

TNT’s Board o Management has ormed two committees to assist with

compliance with applicable corporate governance requirements: the disclosure

committee and the ethics committee.

The disclosure committee advises and assists TNT’s Board o Management to

ensure that TNT’s disclosures in all report s are ull, air, accurate, timely and

understandable and that they airly present the condition o the company in all

material respects. The disclosure committee provides oversight o the design,

development, implementation and ongoing eectiveness o TNT’s disclosure

controls and procedures.

The ethics committee is appointed to advise and assist in developing and

implementing group policies and procedures aimed at enhancing integrity

and ethical behaviour and preventing raud throughout TNT worldwide, and

monitoring compliance with integrity and ethical behaviour standards. The ethics

committee oversees and coordinates investigations resulting rom complaints

via the TNT Group Procedure on Whistleblowing and/or the TNT Group Policy

on Fraud Prevention, and it advises and makes recommendations with regard

to guidelines or disciplinary actions. The ethics committee also advises and

makes recommendations to the Board o Management and line-management

on the mitigation o raud risk and on ethical and anti-corruption matters. The

ethics committee reports regularly to the Board o Management and every six

months to the Supervisory Board.

The by-laws o the Board o Management and the terms o reerence o the

disclosure committee can be viewed on TNT’s corporate website, group.tnt.com.

The Board o Management provides the Supervisory Board in a timely manner

with the inormation necessary or the proper perormance o its duties. In

addition, the Board o Management is required to provide the necessary

means, allowing the Supervisory Board and its individual members to obtain all

inormation necessary to be able to unction as the super visory body o TNT. In

its communication with the Supervisory Board the Board o Management seeks

ull transparency.



Annual report 2008

Corporate govern

chapte

Members o the Board

o Management M.P. (Peter) Bakker (1961, Dutch)

Chie Executive Ofcer Peter Bakker has been CEO and chairman o the Board o Management since

November 2001. He joined Royal TNT Post (then called PTT Post) in 1991

and was appointed fnancial director o its parcels business unit in 1993. Hewas appointed fnancial control director o TNT Post in 1996 and became a

member o the board o management o TNT Post in 1997. Since the demerger

o TNT N.V. (then called TNT Post Groep N.V.) rom Royal PTT Nederland

N.V. until his appointment as CEO, Mr Bakker was chie fnancial ofcer and a

member o TNT’s Board o Management. Beore joining TNT Post, Mr Bakker

worked or TS Seeds Holdings.

Mr Bakker’s port olio includes corporate strategy, corporate relations, general

counsel, corporate responsibility, human resources and internal audit. Mr Bakker

was reappointed as a member o the Board o Management and chairman o

the Board o Management by the Super visory Board or another our year term

in April 2008.

Mr Bakker is a member o the advisory board o World Press Photo and a

member o the board o Foundat ion Moving the World. He was the chairman o

the Dutch Cabinet Committee on Labour Market Participation rom February

until May 2008 and a member o the AFM Capital Markets Committee until

November 2008.

C.H. (Henk) van Dalen (1952, Dutch)

Chie Financial Ofcer Henk van Dalen has been CFO and a member o the Board o Management

since April 2006. He started his career at DSM N.V. in 1976, where he held

various human resource and general management positions. From 2000 until

March 2006 Mr Van Dalen was a member o the board o management and

CFO o DSM N.V.

Mr Van Dalen’s portolio includes fnancial reporting and accounting, risk

management and internal control, corporate responsibility reporting, mergers

and acquisitions, business control, treasury, tax, investor relations, and legal

and integrity.

Mr Van Dalen is a member o the supervisory board o Macintosh Retail Group

N.V. and NIBC Bank N.V. Furthermore, he is a board member o the “Nationaal

Fonds 4 en 5 mei” and a member o the board o advisors o AIESEC Nederland

and NEVIR (Nederlandse Vereniging voor Investor Relations). He is also treasurer o

the Netherlands Olympic Committee (NOC*NSF ). Mr Van Dalen was a member

o the board o advisors o Arthur D. Litt le Netherlands until April 2008.

H.M. (Harry) Koorstra (1951, Dutch)

Group Managing Director MailHarry Koorstra has been group managing director Mail and a member o the

Board o Management since July 2000. He is due or reappointment as member

o the Board o Management in 2009. Mr Koorstr a joined Royal TNT Post (then

called PTT Post) in 1991 as managing direc tor o its then Media Service business

unit and became a member o its board o management in 1997. Beore joining

the company, Mr Koorstra worked at VNU N.V. or 15 years, lastly as general

director o its Admedia/VNU Magazine Group.

Mr Koorstra is chairman o the super visory board o Hermans Investments B.V.

and a member o the supervisory board o Royal Swets and Zeitlinger Holding

N.V. He is also member o the executive committee and general board o the

Conederation o Netherlands Industry and Employers (VNO-NCW) and a

member o the advisory board o Boer & Croon.

M.C. (Marie-Christine) Lombard (1958, French)

Group Managing Director ExpressMarie-Christine Lombard has been group managing director Express and a

member o the Board o Management since January 2004. She joined Jet Services

in France in 1993. Upon TNT’s acquisition o Jet Services in 1999, Ms Lombard

joined TNT (then called TNT Post Groep N.V.) as the managing director o

the domestic Express business and rom March 2001 until January 2004 she

was managing director o TNT’s international Express business in France. Ms

Lombard was reappointed as a member o the Board o Management by the

Supervisory Board or another our year term in April 2008.

Ms Lombard is a member o the supervisory board o Royal Wessanen N.V. and

o METRO AG.

The members o the Board o Management have no important outside board

positions as defned in the Dutch corporate governance code other than those

listed above.

Supervisory BoardThe Supervisory Board is charged with supervising the policies o the Board o

Management and the general course o aairs o the company and the business

connected with it, as well as assisting the Board o Management by providing

advice. The Supervisory Board evaluates the main organisational structure

and the control mechanisms established by the Board o Management. The

responsibility or proper perormance o its duties is vested in the Supervisory

Board as a whole. Members o the Supervisory Board may take positions

dierent rom those o the Board o Management.

In perorming its duties the Supervisory Board is charged with acting in

accordance with the interests o TNT and its afliated businesses. It shall

take into account the relevant interest o the company’s stakeholders, and,

to that end, consider all appropriate interests associated with the company.

Members o the Supervisory Board perorm their duties without mandate and

independent o any particular interest in the business o the company. TNT’s

Supervisory Board is responsible or the quality o its own perormance and or

this purpose annually reviews its perormance.

Share ownership is not required to qualiy as a member o the Supervisory

Board. Under the large company regime members o the Supervisory Board

are appointed by the general meeting o shareholders ollowing nomination by

the Supervisory Board. The general meeting o shareholders can, urthermore,




Corporate governance

chapter 10

dismiss the Supervisory Board as a whole by an absolute majority o the votes

cast representing at least one third o the issued capital. For ur ther details on

the appointment and dismissal o (members o) the Supervisory Board see

articles 28 and 29 o TNT’s articles o association.

TNT’s articles o association and the by-laws o the Supervisory Board can be

viewed on TNT’s corporate website.

Conict o interest o Board members

The Supervisory Board is responsible or deciding how to resolve a conict

o interest between members o the Board o Management, members o

the Supervisory Board and/or the external auditor on the one hand and the

company on the other hand.

A member o the Board o Management or o the Supervisory Board is required

to report immediately and provide all relevant inormation to the chairman o

the Supervisory Board and to the other members o the Board o Management

(i it concerns a member o that board) on any conict o interest or potential

conict o interest that may be o (material) signifcance to the company and/

or to the relevant member. I the chairman o the Supervisory Board has a

conict o interest or potential conict o interest that is o material signifcance

to the company and/or to him, he is required to report this immediately to the

vice-chairman o the Supervisory Board and provide all relevant inormation.

In both situations, this includes inormation concerning a spouse, registered

partner or other lie companion, oster child or relatives by blood or marriage

up to the second degree.

In the event o a conict between TNT and a member o its Board o

Management, the company will be represented by another member o the

Board o Management or a member o the Super visory Board appointed by the

Supervisory Board or this purpose.

A decision to enter into a transaction involving a conict o interest with a

member o the Board o Management or a member o the Supervisory Board

that is o (material) signifcance to the company or to the relevant member

requires the approval o the Supervisory Board. No such transactions were

entered into in 2008, thereore compliance with best practice provisions II.3.2 to II.3.4 and III.6.1 to III.6.4 inclusive o the Dutch corporate governance code

did not come up or discussion.

The by-laws o the Board o Management and the Supervisory Board also

include a provision that a member o the Board o Management or o the

Supervisory Board shall not t ake part in any discussion or decision making that

involves a subject or transaction in relation to which such member has a conict

o interest with the company.

Securities owned by Board membersThe members o the Supervisory Board and Board o Management and TNT’s

other senior management are subject to the TNT Group Policy on Inside

Inormation, which contains rules o conduct to prevent trading in TNT’s

fnancial instruments when in possession o inside inormation.

TNT’s Supervisory Board has adopted a policy concerning the ownershipo and transactions in securities other than TNT’s fnancial instruments by

members o the Board o Management and the Supervisory Board. This policy

is incorporated in the by-laws o the Board o Management and the by-laws

o the Supervisory Board and requires that each member o the Board o

Management and Supervisory Board gives periodic notice, at leas t quarterly,

to TNT’s corporate secretary, acting as compliance ofcer, o any changes in

his or her holding o securities in Dutch listed companies. A member o the

Board o Management or the Supervisory Board who invests exclusively in

listed investment unds or who has transerred the discretionary management

o his or her securities portolio to an independent third party by means o a

written mandate is exempted rom compliance with these internal notifcation

requirements.

The total number o shares held by each member o the Board o Management

and the Supervisory Board, other than shares allocated under TNT’s

perormance share plan, bonus/matching plan and/or share option plan, is

tabled below.

TNT shares held by the members o theBoard o Management and Supervisory Board1

As at 31 December

2008

Peter Bakker 60,324

Henk van Dalen 7,035

Harry Koorstra 33,388

Marie-Christine Lombard 25,368

Piet Klaver 3,500

1 – This table does not include any granted rights on shares and any share options allocated to the members o the Board o Management under TNT’s perormance share plan, bonus/

matching plan and/or share option plan. See chapter 8, under Remuner ation in 2008 or urther inormation on these securities. The inormation in this table is publicly available at www.am.nl.



Annual report 2008

Corporate govern

chapte

Shareholders and their rights

General meetings o shareholders

Frequency and venueTNT is required to hold an annual general meeting o shareholders within six

months ater the end o the fnancial year in order to, amongst other things,

adopt the fnancial statements and to decide on any proposal concerning

dividends. Further to Dutch law, the release rom liability o the members o theBoard o Management and the Supervisory Board or the perormance o their

respec tive duties during the fnancial year is also an agenda item o this meeting.

However, this release only covers liability or matters reec ted in the fnancial

statements or otherwise disclosed to the general meeting o shareholders prior

to the adoption o the fnancial statements.

Other general meetings o shareholders are held as oten as the Board o

Management or the Supervisory Board deem necessary and shall in principle

be convened i the Board o Management proposes to take a decision that will

result in a signifcant change in the identity or character o TNT or its business.

Furthermore, in the event shareholders jointly representing at least 10% o the

outstanding share capital make a written request to convene a general meeting

o shareholders to the Supervisory Board and the Board o Management,

stating their proposed agenda in detail, a general meeting o shareholders shall

in principle be convened.

General meetings o shareholders may only be held in Amsterdam, The Hague,

Hooddorp or in the municipality o Haarlemmermeer (Schiphol).

AgendaOne or more shareholders holding shares representing at least 1% o TNT’s

issued share capital or representing a value o €50 million according to the

Ofcial Price List o Euronext Amsterdam (Ofcial Price List) has/have the right

to request the Board o Management or the Super visory Board to place items

on the agenda o the general meeting o shareholders. Such a request has to be

honoured by the Board o Management or the Supervisory Board provided that

important company interests do not dictate otherwise and that the request is

received by the Board o Management or the Super visory Board in writing, at

least sixty days beore the date o the general meeting o shareholders.

Notice to convene

General meetings o shareholder s are convened by at least 15 days’ prior noticepublished in a nationally distributed daily newspaper and in the Ofcial Price List.

Admission to and voting

rights at the meetingEach shareholder has the right to attend general meetings o shareholders,

either in person or by written or elec tronic proxy, to address the meeting and to

exercise voting rights, subject to the provisions o TNT’s articles o association.

An eligible shareholder has the aorementioned rights i registered as

shareholder on the applicable record date as set by the Board o Management.

Each o the shares in TNT’s share capital carries the right to cast one vote.

Unless otherwise required by Dutch law or TNT’s articles o association,

resolutions are passed by a simple majority o votes cast by the shareholders

present or represented at the meeting.

Under TNT’s articles o association there are no limitations to the rights o

Dutch, non-resident or oreign shareholders to hold or exercise voting rights

in respect o TNT’s securities, and TNT is not aware o any such restrictions

under Dutch corporate law.

DividendTNT pays dividends out o profts or by exception out o the distributable part

o its shareholders’ equity as shown in TNT’s fnancial statements. TNT may

not pay dividends i the payment would reduce shareholders’ equity below the

sum o the paid-up capital and any reserves required by Dutch law or its articles

o association. Subject to certain exceptions, i a loss is sustained in any year,

TNT may not pay dividends or that year and TNT may not pay dividends in

subsequent years until the loss has been compensated or out o subsequent

years’ profts.

Liquidation rightsIn the event o TNT’s dissolution and liquidation, the assets remaining ater

payment o all debts and liquidation expenses are to be distributed in the

ollowing order o preerence: frst , to the holders o all outstanding preerence

shares B (i any) the nominal amount paid up on these shares plus accumulated

dividends or preceding years which have not yet been paid; and second, to

holders o the ordinary shares in proportion to their shareholdings.

Changes to the rights o shareholdersRights o shareholders may change pursuant to an amendment o the ar ticles

o association, a statu tory merger or demerger within the mean ing o book 2 o

the Dutch Civil Code or dissolution o the company. A resolution o the genera l

meeting o shareholders is required to eect these changes. Under TNT’s

articles o association, such resolution may only be adopted upon a proposal o

the Board o Management that has been approved by the Supervisory Board.

Major shareholdersTo TNT’s knowledge TNT is not directly or indirectly owned or controlled

by another corporation or by any government. TNT does not know o any arrangements the operation o which might, at a subsequent date, result in a

change o control, except as described under “Foundation Protection TNT and

preerence shares B” below.

The Financial Markets Supervision Act (Wet op het fnancieel toezicht ) imposes

a duty to disclose percentage holdings in the capital and/or voting rights in the

company when such holding reaches, exceeds or alls below 5%, 10%, 15%,

20%, 25%, 30%, 40% , 50%, 60%, 75% and 95%. Such disclosure must be made

to the Netherlands Authority or the Financial Markets (AFM) without delay.

The AFM t hen notifes the company.





chapter 10

Articles o association, share

acquisition, reduction and

increase o issued share capitalAmendments to the articles of associationAmendments to TNT’s articles o association can take place upon a proposal

o the Board o Management approved by the Supervisory Board and adopted

by the general meeting o shareholders. A proposal to amend the articles

o association must be stated in a notice convening a general meeting o shareholders and announced by publication in a nationally distributed daily

newspaper and in the Ofcial Price List, or in such manner as shall be permitted

by law at any time. The proposal shall be passed upon an absolute majority o

the votes cast in the general meeting o shareholders.

Ability of the company to acquire its own sharesIn order to execute share buy-back programmes, TNT must be allowed to

acquire its own shares. Under its articles o association, TNT may acquire its

own shares, provided that they are ully paid-up. I such shares are acquired or

consideration, the ollowing conditions apply:

TNT’s shareholders’ equity less the purchase price may not all below the –

sum o the paid-up capital and any reserves required to be maintained by

Dutch law or pursuant to the articles o association, and

ollowing the share acquisition, TNT may not hold shares with an aggregate –

nominal value exceeding one-tenth o its issued share capital.

The acquisition o shares in its capital may be eected by a resolution o the

Board o Management, subject to the approval o the Supervisory Board.

In addition to the above, the Board o Management requires prior authorisation

by the general meeting o shareholders to acquire shares in the company or

consideration. This authorisation may be valid or a period not exceeding 18

months rom the date o the meeting and must speciy:

the number o shares that may be acquired, –

the manner in which shares may be acquired, and –

the price limits within which shares may be acquired. –

Authorisation by the general meeting o shareholders is not required i TNT’s

own shares are acquired or the purpose o transerring those shares to TNT

employees pursuant to any arrangements applicable to such employees.

Reduction of issued share capital in general

Cancellation o shares ollowing a repurchase is one o the ways to reduce theissued share capital. TNT’s issued share capital may also be reduced by way o

a reduction o the nominal value o its shares by amendment o TNT’s articles

o association. The general meeting o shareholders is the body competent

to resolve to reduce TNT’s issued share capital. Pursuant to TNT’s articles

o association, such resolution may be taken upon a proposal o the Board o

Management that has been approved by the Supervisory Board. The latter

requirement is more stringent than is required by Dutch law.

Increase of issued share capital by issuanceof shares/pre-emptive rightsTNT’s Board o Management has been designated as the body competent to

resolve to issue shares in TNT and to grant rights to subscribe or ordinary

shares, including options and warrants. Pursuant to TNT’s current articles

o association, such resolution is subject to the approval o the Supervisory

Board. The scope and duration o this authority o the Board o Management

is determined by the general meeting o shareholders. Under TNT’s articles o

association the scope relates at most to all shares in i ts authorised share capital

that have not been issued. The duration o the authority shall be or a period o

fve years at most.

Extension o the term o designation o the Board o Management as the body

competent to issue shares may also be eected by amending TNT’s articles o

association to that eect. I no ex tension is given, the issue o shares or granting o rights to subscribe or ordinary shares requires a resolution o the general meet ing

o shareholders. Such resolution may only be taken upon a proposal o the Board

o Management, which proposal requires approval o the Supervisory Board.

In principle, each holder o ordinary shares has a pre-emptive right to any

issue o ordinary shares or the granting o rights to subscribe or these shares.

Holders o American Depositary Receipts do not qualiy as holders o ordinary

shares in this respect.

Pursuant to TNT’s articles o association shareholders’ pre-emptive rights

may be restricted or excluded by a resolution o the Board o Management,

provided and as long as the Board o Management has been designated as the

body competent to resolve to issue shares. Such resolution is subject to the

approval o the Supervisory Board. Pursuant to TNT’s articles o association

the provisions with respect to the scope and duration o the authority to issue

shares and grant rights to subscribe or ordinary shares are also applicable to the

scope and duration o the authority to exclude or restrict pre -emptive rights.

Foundation Protection TNTand preerence shares BStichting Bescherming TNT (Foundation Protection TNT or the Foundation)

was ormed to care or TNT’s interests, the enterprises connected with TNT

and all interested parties, such as shareholders and employees, by, among

other things, preventing as much as possible inuences which would threaten

TNT’s continuity, independence and identity contrary to such interests. The

Foundation is an independent legal entity and is not owned or controlled by any

other legal person.

TNT’s articles o association provide or protective preerence shares B thatcan be issued to the Foundation to serve these interests . The preerence shares

B have a nominal value o €0.48 and have the same voting rights as TNT’s

ordinary shares. There are currently no preerence shares B issued, although

the Foundation has a call option to acquire a number o preerence shares B not

exceeding the total issued amount o shares minus one and minus any shares

already issued to the Foundation.

The exercise price with respect to the call option is the nominal value o €0.48 per

preerence share B, although upon exercise only €0.12 per preerence share B is

required to be paid. The additional €0.36 per preerence share B is due at such

time as TNT makes a call or payment by resolution o its Board o Management ,

which resolution is subject to the approval o the Supervisory Board. The

Foundation has credit acilities in place to enable it to pay the exercise price.



Annual report 2008

Corporate govern

chapte

TNT and the Foundation have entered into the call option agreement to

prevent, delay or complicate unsolicited inuence o shareholders, including an

unsolicited take-over or concentration o power. The issue o preerence shares

B enables TNT to consider its position in the then-existing circumstances. The

preerence shares B will be outstanding no longer than str ictly necessary. Once

the reason or the placing o the preerence shares B no longer exists, TNT

shall propose to the general meeting o shareholders to cancel the preerence

shares B entirely as a class.

Ater six months have expired since the acquisition o preerence shares B, theFoundation may require TNT to convene a general meeting o shareholders

to discuss cancellation o the preerence shares B. However, should the

Foundation within this period o six months receive a demand or repayment

under the credit acilities reerred to above, it may also require TNT to convene

said meeting. In accordance with TNT’s current articles o association a general

meeting o shareholders shall be convened by TNT ultimately twelve months

ater the frst date o issuance o any preerence shares B to the Foundation or

the frst time. The agenda or that meeting shall include a resolution relating to

the repurchase or cancellation o the preerence shares B.

TNT has granted to the Foundat ion the right to fle an application or an inquiry

into the policy and conduct o business o TNT with the Enterprise Chamber o

the Amsterdam Court o Appeal (Ondernemingskamer ). TNT believes that this

may be a useul option in the period beore the issuance o preerence shares B,

without causing a dilution o the rights o other shareholders at that stage.

The members o the board o the Foundation are R. Pieterse (chairman), J.H.M.

Lindenbergh, W. van Vonno and M.P. Nieuwe Weme. All members o the board

o the Foundation are independent rom TNT. This means that the Foundation

is an independent legal entity in the sense reerred to in section 5:71 paragraph

1 sub c o the Netherlands Financial Markets Supervision Act.

Dividend in TNTUnder TNT’s current ar ticles o association, i preerence shares B have been

issued, TNT has to pay dividends on the paid-up portion o the nominal value o

the preerence shares B. Payment is made at a rate o the average 12-monthly

EURIBOR (EURO Interbank Oered Rate), weighted to reect the number o

days or which the payment is made, plus a premium to be determined by the

Board o Management, subject to the approval o the Supervisory Board, o at

least one percentage point and at most three percentage points.

The Board o Management then determines, subject to the approval o the

Supervisory Board, which par t o the remaining profts shall be appropriated

to reserves. The proft that remains ater appropriation is at the disposal o the

general meeting o shareholders.

The Board o Management may determine, subject to the approval o the

Supervisory Board, that any dividend on ordinary shares be paid wholly or

partly in TNT’s ordinary shares rather t han in cash.

The Board o Management may, subject to the approval o the Supervisory Board

and subject to provisions o Dutch law, distribute one or more inter im dividends.

No dividend shall be paid on shares held by TNT in its own capital. Such shares

shall not be included or the computation o the proft distribution, unless the

Board o Management resolves otherwise, which resolution is subject to the

approval o the Supervisory Board.

The TNT Reserves and Dividend Guidelines 2008 can be viewed on TNT’s

corporate website. Any changes to these guidelines shall be explained as a

separate agenda item at the annual general meeting o shareholders.

Corporate events in 2008

Annual general meeting o

shareholders held on 11 April 2008On 11 April 2008, TNT held its annual general meeting o shareholders at

Schiphol-Rijk, the Netherlands. The attendance rate was 48% o the total

outstanding share capi tal, up rom 32% in 2007.

During the annual general meeting o shareholders all proposed resolutions

were adopted, including the extension o authority to issue shares. The annual

general meeting o shareholders extended the then-current authority o the

Board o Management to issue ordinary shares or another period o eighteen

months to end on 11 October 2009. Ordinary shares up to a maximum o

10% o the issued share capital may be issued by resolution o the Board o

Management. An additional 10% o the issued share capital may be issued that

way when a share issue takes place in relation to a merger or acquisition.

The resolutions o the meeting, the agenda and the voting results or each

resolution as well as the presentations given during the meeting can be ound

on TNT’s corporate website. Minutes o the meeting can be ound both in

Dutch and in English on TNT’s corporate website.

AFM notifcationsOn 4 March 2008, TNT r eceived notifcation rom the AFM that it had received

disclosures under the Netherlands Financial Markets Supervision Act o a

substantial holding in the company o 5% by Lansdowne Partners Limited. On

25 July 2008, TNT received notifcation rom the AFM that it had received

disclosures o a substantial holding in the company o 6% by Allianz SE, which

was subsequently reduced to close to 0% as o 30 July 2008. On 4 August 2008,TNT received notifcation rom the AFM that it had received disclosures o a

substantial holding in the company o 5% by UBS AG, which was subsequently

reduced to below 5% as o 8 August 2008 .

More inormation can be ound on the website o AFM (www.am.nl) under

notifcation substantial holdings.





chapter 10

Auditor TNT’s external auditor, PricewaterhouseCoopers Accountants N.V., is

appointed by TNT’s general meeting o shareholders. TNT’s audit committee

has the sole authority, subject to confrmation by the Supervisory Board, to

recommend to the general meeting o shareholders the appointment or

replacement o the external auditor. The audit committee is directly responsible

or the oversight o the work o the ex ternal auditor on behal o the Supervisory

Board (including resolution o disagreements between management and the

external auditor regarding fnancial reporting) or the purpose o preparing or issuing an audit report or related work. The audit committee is required to

pre-approve all auditing and audit related services, and permitted non-audit

services (including the ees and terms thereo) to be provided by the external

auditor. A general annual pre-approval or certain routine services is granted by

the audit committee. Signifcant non-audit services require a tender process,

and certain services are prohibited outright. I n its approval-granting process,

the audit committee considers the applicable regulations and stock exchange

rules and whether the external auditor is best suited to perorm the services

eectively and efciently. The audit committee also considers the ratio between

the total amount o ees or audit and audit related services and the total amount

o ees or non-audit services. The audit committee requires a ormal writ ten

statement rom the exter nal auditor confrming its independence.

Except or some services in the aggregate amount o 1% o the total amounts

paid to the external auditor, all services perormed by the ex ternal auditor in

2008 ollowed the pre-approval process. While this is a small deviation, TNT is

committed to ensure that the pre-approval process is ollowed in all cases.

Conicts o interest and potential conicts o interest between the external

auditor and TNT are resolved in accordance with the terms o reerence o the

audit committee and in particular the annex thereto: the “TNT Group Policy

on Auditor Independence & Pre-Approval”, which can be viewed on TNT ’s

corporate website.

At times TNT uses its external auditor to provide services in cases where these

services do not conict with the external auditor’s independence. The TNT

Group Policy on Auditor Independence & Pre-Approval governs how and

when TNT may engage its exter nal auditor.

The audit committee and the Board o Management are required once every

three years to conduct a thorough assessment o the unctioning o the

external auditor within the various entities and in the dierent capacities in

which the external auditor acts. The last assessment was held in 2007. Themain conclusions o this assessment were communicated to the 2007 annual

general meeting o shareholders. The lead (signing) partner and the concurring

(review) partner o the external auditor are rotated a ter a maximum period

o seven years.

TNT’s internal audit unction, Corporate Audit Services (CAS), operates under

the responsibility o the Board o Management and is subject to monitoring

by the Supervisory Board, assisted by the audit committee. The Board o

Management is required to ensure that the external auditor and the audit

committee are involved in drawing up the tasks o the internal audit unction.

See note 20 to the consolidated fnancial statements o TNT N.V. or the ees

paid to PricewaterhouseCoopers Accountants N.V. and the distribution o the

ees between audit related services and non-audit services.

Dutch corporategovernance codeTNT applies the principles and best practices o the Dutch corporate

governance code published in December 2003 including the good practice

recommendations published by the Corporate Governance Code Monitoring

Committee in its subsequent reports until December 2008, except or the

ollowing best practice provisions and recommendations below that are not

ully applied:provision II.2.7 Dutch corporate governance code states that the –

remuneration in the event o dismissal o members o the Board o

Management may not exceed one year’s salary (the “fxed” r emuneration

component). In case one year is maniestly unreasonable, the maximum o

severance pay may not exceed twice the annua l salary.

severance payments other than related to a change o control or members –

o the Board o Management are one year base salary or a maximum o

two years’ base salary in the frst our-year term i one year is considered

to be unreasonable. The employment contract o TNT’s CFO eective

1 April 2006 states that the severance payment other than related to a

change o control will amount to twenty-our months base salary during

the frst our year term as a member o the Board o Management. During

urther terms as a member o the Board o Management, his severance

payment amounts to twelve months base salary. As stated in chapter 8,

contracts entered into prior to 2004 remain unaltered.

For members o the Board o Management who are not residents o the –

Netherlands, TNT ollows local market practice or that part o the base

salary earned in the country o residence. This is done to ensure that

TNT can oer a competitive package to oreign members o the Board o

Management commensurate with local practice.

severance payments in case o a change o control equal the sum o the –

last annual base salary and pension contribution plus the average bonus

received over the last three years, multiplied by two. No distinction is

made between resident or non-resident members o the Board o

Management. TNT is o the opinion that such payment is realistic taking

into account the special position o members o the Board o Management

in a change o control situation. Also, the Supervisory Board may decide

that the perormance shares vest in whole or in part.

provision III.3.4 Dutch corporate governance code states that the –

maximum number o supervisory board positions held by the members

o the Supervisory Board with Dutch listed companies cannot exceed

fve (whereby a chairmanship counts twice). From 1 January 2008 until 1

January 2009 TNT’s chairman o the Supervisory Board, Mr Hommen, heldmore than fve board memberships. This situation was remedied when Mr

Hommen stepped down as chairman on 31 December 2008. See chapter 9

under Members o the Supervisory Board.

provision II.2.10(e) Dutch corporate governance code states that the –

remuneration overview shall in any event contain a description o the

perormance criteria on which the perormance related component o

the variable compensation is dependent. TNT discloses the nature o the

perormance targets but not the actual targets in the sense that TNT has

opted to use perormance targets aligning the remuneration o the Board

o Management with the business perormance. As a result the targets are

so specifc that they contain competition-sensitive inormation, and are

thereore not disclosed. See chapter 8 under Current remuneration policy.



Annual report 2008

Corporate govern

chapte

In the chapter sections reerred to above, TNT explains why it deviates

rom these best practice provisions and recommendations. Material uture

(corporate) developments might justiy urther deviations rom the Dutch

corporate governance code at the moment o occurrence.

On 10 December 2008 the Corporate Governance Code Monitoring

Committee published new principles and best practice provisions in a revised

Code. TNT is studying the revised Code and will apply the principles and best

practices in the fnancial year 2009. TNT will report on how it complied with

the principles and best practices o the revised Code in its annual report over the fnancial year 2009.

Each substantial change in the corporate governance structure o the company

and in the compliance o the company with the Dutch corporate governance

code shall be submitted to the general meeting o shareholders or discussion.

The ull text o the Dutch corporate governance code can be viewed on TNT’s

corporate website. Since its delisting rom the New York Stock Exchange on

18 June 2007 and the termination o its reporting obligations with the United

States Securities and Exchange Commission on 16 September 2007, TNT is no

longer subject to the corporate governance rules o this exchange nor to the

provisions o the Sarbanes-Oxley Ac t.



Annual report 2008

Regulatory environm

chapte

considered this minimum wage unconstitutional. In its judgement o 7 March

2008, the administrative court in frst instance (Verwaltungsgericht ) held that

the mandatory €9.80 minimum wage is invalid. The German government fled

an appeal against that decision with the administrative court in second instance

(Oberverwaltungsgericht ). On 18 December 2008, the Oberverwaltungsgericht

confrmed the decision o the court in frst instance. However, the court also

ruled that TNT’s claim, being one o three claimants, was not admissible and

reerred TNT’s claim to the labour courts. It is likely that TNT will fle an appeal

against the inadmissibility o its claim, because the decision o the court on

TNT’s inadmissibility is not in line with recent jurisprudence as to claims o thisnature.

The German government fled a urther appeal (Revision) against the decision to

the Federal Administrative Court ( Bundesverwaltungsgericht ) in Leipzig.

As a result, these minimum wages are still generally binding. Moreover,

the German Labour Ministry is in the process o preparing changes in social

legislation to simpliy declaring generally binding minimum wages. On 26

March 2008, TNT lodged a complaint at the European Commission against the

German government or inringement o undamental rules o the European

Treaty on competition and reedom o establishment.

The discussion in the Nether lands on labour conditions is still ongoing. Although

the new postal operators and the unions reached a collective labour agreement

in November 2008, the unions have asked or political support or compliance

with this agreement. Thereore, the Dutch Cabinet started talks with employers

and unions. An intended new date or liberalisation has not been set yet.

The Dutch First Chamber o Parliament is expected to vote on the Dutch

Postal Act only i the conditions are satisactorily met. A new Dutch Postal

Decree, being lower legislation and dealing amongst others with damages and

the limitation o the scope o mandatory services, has passed the Dutch Second

Chamber o Parliament, while a new Dutch Postal Regulation still has to be

published. This Postal Regulation deals amongst others with tar i and reporting

requirements.

Current legislationIn the Netherlands, the key legislation regulating TNT’s mail activities is the

Dutch Postal Act. This Act requires TNT to perorm the mandatory postal

services in the Netherlands, some o which are exclusive to TNT (the

reserved postal services). In connection with the Dutch Postal Act there is

the parliamentary Postal Decree, which specifes the ser vices that constitute

the mandatory postal services and defnes the scope o the reserved postal

services. The combination o these mandates and exclusive rights is commonly called the “Postal Concession”. The Postal Concession is perormed by TNT’s

subsidiary Koninklijke TNT Post B.V.

Furthermore, there is a General Postal Guidelines Decree, which specifes

TNT’s obligations regarding the perormance o mandatory postal ser vices and

the transparency o the fnancial accounting o these services according to the

EU Postal Directive.

OPTA, the independent Supervisory Authority or Post and Telecommunications

established by the government, supervises TNT’s perormance o the

mandatory postal services. The responsibility or postal policy remains under

the authority o the Minister o Economic Aairs.

The Postal Concession

Mandatory postal servicesThe domestic mandatory postal services mainly consist o the conveyance

against payment o standard single rates o the ollowing postal items:

letters (including reply items) and printed matter with a maximum individual

weight o two kilogrammes,

postal parcels with a maximum individual weight o 10 kilogrammes, and –

registered, registered insured and registered value declared items. –

In addition, bulk mail o letters up to an individual weight o 50 grammes, which

are conveyed against other than standard single rates, are part o the mandatory

postal services. Mandatory postal services also cover rental o P.O. boxes.

The Postal Act does not require TNT to provide the delivery o bulk printed

matter such as advertising, magazines and newspapers, the delivery o bulk

letters with an individual weight above 50 grammes or unaddressed mail items.

For international inbound and outbound mail, based on the Dutch Postal Act

and in accordance with the rules o the UPU, mandatory postal services mainly

comprise the conveyance against payment o both postal items at standard

single rates and o bulk mail items at other than standard single rates with a

maximum individual weight o two kilogrammes and o postal parcels with a

maximum individual weight o 20 kilogrammes. In addition, mandatory postal

services cover the postal services regulated by the UPU.

Regulatory conditions or the provisiono mandatory postal servicesRegarding mandatory postal services the General Postal Guidelines Decree

imposes various regulatory conditions on TNT with respect to service

provision, taris, cost and revenue accounting, fnancial administration and

reporting. Other than the mandatory postal services, none o TNT’s postal

services is subject to governmental control.

According to section 2d o the Dutch Postal Act, TNT is obliged to give its

competitors entrance to its P.O. boxes. This service has to be delivered against

reasonable, objectively justifable and non-discriminatory conditions and

remunerations. To date these conditions and remunerations are negotiated

results between parties. A similar, voluntary arrangement is made with TNT’s

competitors with regard to return-to-sender items o competitors that enter

TNT’s processes through the collection boxes.

With respect to service levels, the General Postal Guidelines Decree requiresTNT to provide a level o service that complies with modern standards, to

provide nationwide services and to per orm a delivery round every day, except

or Sundays and public holidays. TNT is required to deliver not less than 95%

o all domestic letters the day ater the day o posting, not including Sundays

and public holidays. TNT is required to maintain a network o service points

(letter boxes, post ofces and agents) or the access o the genera l public to the

services. With respect to rates and conditions, TNT is required to set r ates and

associated conditions that are transparent, non-discriminatory and uniorm.

However, TNT may grant volume discounts or items o correspondence and

negotiate specifc prices and conditions with high volume users. TNT is urther

required to submit proposed rate changes to OPTA, which has to assess

whether the proposed changes are in accordance with the price cap system.




Regulatory environment

chapter 11

The price cap system measures tari developments in two dierent baskets o

services, a “total basket” and a “small users basket”. The total basket comprises

domestic mandatory postal services provided to all customers. The small users

basket comprises the same services in mutual relations which are representative

or consumers and small business users.

The price cap sys tem uses a weighing actor or each service in these baskets.

Up to 2008 the levels o the indices or both baskets were not to exceed the

ofcial national index o wages or employees in the market sector.

Reserved postal servicesUnder the Dutch Postal Act and the Postal Decree, the reserved postal services

include the ollowing exclusive rights:

the conveyance o domestic and inbound international letters with a –

maximum individual weight o 50 grammes at a rate o less than two and a

hal times the standard single r ate (currently €0.44),

the exclusive right to place letter boxes intended or the public alongside or –

on public roads, and

the exclusive right to issue postal stamps and imprinted stamps bearing the –

likeness o 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 o parcels, lette rs weighing in excess o 50

grammes and printed materials such as advertising, newspapers and magazines.

In addition, the exclusive rights do not ex tend to the conveyance o letters by a

business to its own customers.

Accounting and other fnancial obligationsTNT’s obligations on reporting include the establishment o an annual report

on TNT’s perormance o the mandatory postal services. TNT’s fnancial

accounting obligations require TNT to maintain separate fnancial accounts

within its internal fnancial administration or mandatory postal ser vices. This

separate accounting must be broken down into reserved postal ser vices and

other mandatory postal services and must be separated rom the accounting

o TNT’s other activities. Every year, TNT must submit to OPTA a declaration

o an independent auditor, appointed by OPTA, that its fnancial accounting

system complies with these obligations. This declaration has to be published by

OPTA in the “Staatscourant ”.

Underlying this accounting system and the fnancial reports to OPTA is a sys tem

or allocating cost and revenues to the dierent t ypes o services. This system

complies with the accounting rules laid down in the EU Postal Directive.

Value added tax on postal servicesAt present, TNT is not allowed to charge value added tax (VAT) on postal

items orming part o the mandatory postal services. The ip side o this is that

or mandatory postal services TNT cannot deduct the VAT amounts paid on

its purchases o services and goods related to the mandatory services. TNT is

required to charge VAT on all services not included in the mandatory services,

i.e. the services in competition with other operators. Competitors are required

to charge VAT on those items as well. Thereore, in the Netherlands there is

a level playing feld or competitors and TNT on these services. In most other

Member States o the EU the scope o mandatory services is very large. Hence

a VAT exemption is given to national postal operators over a considerable part

o the postal market in these countries, including or services with individually

negotiable prices. According to the European Commission, this distorts

the unctioning o the Internal Market or postal services. It has launched an

inringement procedure against Sweden, Germany and the United Kingdom on

this VAT issue in order to resolve it.

TNT initiated a procedure in the United Kingdom. The competent Court has

asked the European Court o Justice some pre-judicial questions. The Advocate

General advised on 15 January 2009 that only the universal services provided

in the public interest are exempt rom VAT and that the exemption can not, in

any event, apply where items are carried at individually negotiated prices. This

advice and the answers o the European Cour t o Justice will be o interest to

the European Commission in the inringement procedures.

In Germany, new VAT-legislation is under construct ion. It seems that in practiceDeutsche Post will be able to maintain its exemption.

Express servicesExpress continues to deal with several regulatory developments that need to

be managed properly in order to secure TNT’s entrepreneurial reedom in the

execution o the Focus on Networks strategy or Express.

Governments and postal administrations around the world are redesigning

postal policies. In the EU, political concerns over the fnancial sustainability o

the Universal Postal Service and employment levels in a changing postal sector

increasingly threaten to inuence the regulatory environment o express

delivery services. The European Commission’s declaration emphasising the

dierences between express and universal postal services will considerably

reduce the risk that express delivery services may have to contribute directly

into uture compensation schemes fnancing the Universal Postal Service

in Europe when EU Member States start implementing the requirements o

the EU Postal Directive 2008/6/EC. In several Asian countries, among which

China and India, work on the reorm o the postal regulatory ramework has

continued. TNT closely monitors these developments to secure a level playing

feld or competitive express delivery services in these markets.

The increased attention to the impact o road and air transport on air quality

levels and the process o global warming continues to shape the regulatory

environment or Express. Policy makers have been responding by a wide variety

o regulatory initiatives , like the inclusion o aviation in the EU’s Emission Trading

Scheme as o 2012. Another example is the introduction by local authorities

throughout the world o tax and other schemes managing the access o Express

vehicles used or pick-up and delivery in city centres. In addition to closely

monitoring these developments, TNT is responding proactively, amongst

others in the ramework o its Planet Me initiative.

Customs regulationEective as o 1 January 2008, the EU’s Authorised Economic Operator (AEO)

programme increased border control, with the aim o securing the international

supply chain and modernise customs procedures within the EU. The AEO

status recognises sae, secure and customs compliant business partners in

international trade. On 16 April 2008, the AEO status was granted to TNT

Post, being the frst EU postal operator with the AEO status.

TNT also received its accreditation or the AEO status or its customs related

Express services operations in fve EU countries. TNT is monitoring AEO



Annual report 2008

Regulatory environ

chapte

certifcation programmes in other parts o the world under TNT’s Global

Customs Programme with a view to urther global accreditations. TNT is also

involved in the exploi tation o World Customs Organisation mutual recognition

to create longer term ‘green lanes’ or str ategic major trade routes.

TNT Fashion Group received its accreditation or the AEO status in the

Netherlands.

Public procurementPublic procurement is the purchase o goods, services and public works by

governments. Public sector procurement must ollow transparent, open

procedures ensuring air conditions o competition or suppliers. Curr ently, TNT

does not have an obligation to tender resulting rom any public procurement

regulation.

On 2 February 2004, the EU adopted a package o amendments to simpliy

and modernise its public procurement directives. Those directives impose

EU-wide competitive tendering or public contracts above a cer tain value and

transparency and equal treatment or all tenders to ensure that the contract is

awarded to the tender oering the best value or money. The new Directive

2004/17/EC o 31 March 2004, coordinating the procurement procedures o

entities operating in the water, energy, transport and postal ser vices sectors,

also applies to certain postal and non-postal activities that are not exposed to

competition. However, this Directive let the Member States the possibility o

postponing the application o the Directive on postal services until 1 January

2009. The Netherlands exercised this option. TNT was thereore not subjected

to the Directive in the Netherlands until 1 January 2009.

Competition lawTNT is subject to competition rules in the jurisdictions in which it oper ates. The

most relevant rules stem rom:

European competition lawThe European Court o Justice has explicitly confrmed that the rules o EU

competition law also apply to the national mandatory postal services o the

Member States. The EU published a Notice in 1998 describing the applicationo competition rules to the postal sector and on the assessment o certain state

measures. In particular, TNT is subject to the competition rules contained in

articles 81 and 82 o the EC Treaty and to preventative control o mergers

and acquisitions as regulated in the EC Merger Control Regulation. Ar ticle 81

prohibits collusion between competitors that may aect tr ade between Member

States and which has the objective o restricting competition within the EU.

Article 82 prohibits any abuse o a dominant position within a substantial part

o the EU that may aect trade between Member States. National competition

authorities and national courts have been empowered to apply A rticles 81 and

82 in ull in close operation with the European Commission in order to ensure

the eective and uniorm enorcement o these competition rules.

TNT is also subject to the competition rules laid down in the Agreement o

the European Economic Area (EEA), which corresponds to the rules o EU

competition law. The EEA rules or competition are enorced by the European

Commission and the EFTA Surveillance Authority.

Dutch competition lawThe services TNT provides in the Netherlands, including the mandatory postal

services, all within the scope o the Dutch Competition Act. This Act stipulates

a similar structure and set o rules as the rules o EU competition law on the

prohibition o cartels, the prohibition o abuse o a dominant position and the

preventive control on mergers and acquisitions. Compliance with the Dutch

Competition Act is monitored by the Dutch Competition Authority, which is

commonly called by its Dutch acronym NMa.



INVESTOR RELATIONS,SHARES, DIVIDEND AND

SHAREHOLDER RETURNSAnnual report 2008142

chapter 12 INVESTOR RELATIONS,SHARES, DIVIDEND AND

SHAREHOLDER RETURNSGeneralTNT aims to explain its strategy, business developments and fnancial results

to investors. The CFO has the principal responsibility or investor relations,

with the active involvement o the CEO. The Investor Relations department

organises presentations or analysts and institutional and retail investors, which

can be viewed on the company’s corporate website.

TNT’s policy is to provide shareholders and other par ties in the fnancial markets

with equal and simultaneous inormation about matters that may inuence theshare price. The contacts between the Board o Management on the one hand

and the press and analysts on the other are careully handled and structured.

The company will not compromise the independence o analysts in relation to

the company and vice versa. Briefngs on quarterly results are given either via

group meetings or teleconerences and are both accessible by telephone and

via the corporate website. Briefngs are similarly given to update the market

ater each quarterly announcement. Briefng meetings with institutional

shareholders may be held to ensure that the investment community receives

a balanced and complete view o the company’s perormance and the issues

aced by the business. In addition, TNT communicates with all o its shareholder s

and investors through the publication o the annual report, general meetings o

shareholder s, newsletter s, press releases, and the company’s corporate website.

Analyst meetings can be viewed by shareholders via webcasting. The corporate

website provides all relevant inormation with regard to dates o analyst meetings

and procedures concerning webcasting. Analys ts’ reports and valuations are not

assessed, commented upon or corrected, other than actually, by the company.

For urther inormation visit TNT’s corporate website: group.tnt.com.

TNT does not pay any ee(s) to parties or carrying out research or analysts’

reports or or the production or publication o analysts’ reports, with the

exception o credit rating agencies.

The Board o Management has adopted investor relations and media guidelines

with which all members o the Board o Management must at all times abide

unless explicitly exempted by the CEO.

Contacts with the capital markets are dealt with by the members o the Board

o Management, TNT’s investor relations proessionals and, rom time to time,

other TNT personnel specifcally mandated by the Board o Management.

The corporate website provides all inormation that is required to be published

as well as access to shareholders’ circulars required or any approvals sought

rom the general meeting o shareholders.

The corporate website provides a summary o the resolutions o the general

meetings o shareholders. The votes cast in relation to all resolutions are

disclosed to the persons attending the meeting and the results o the voting are

also published on this website.

TNT is included in the AEX index, which normally consists o the top 25

companies in the Netherlands, ranked on the basis o their turnover in the stock

market and ree oat.

In 2008, 642 million TNT shares were traded on Euronext Amsterdam (2007:

611 million).

Share perormance

2008 2007

Stock price (in €)

High 27.92 36.08

Low 12.95 25.67

Close 13.76 28.25

Earnings per outstanding share (in € cent s) 152.9 257.4

Dividend (in € cents)1 71.0 85.0

Dividend pay-out ratio (as a %)1 46.4 33.0

Dividend yield

(based on closing rate or the year) 6.18 3.01

P/E Ratio 8.44 10.98

Number o issued ordinary shares

at year end 360,021,821 379,224,255

Stock market capitalisation (in € billions) 4,954 10,713

Adjusted stock market capitalisation

(in € billions)2 4,939 10,467

1 – For 2008 this includes the cash dividend and proorma value o the proposed stock dividend.

2 – Adjusted or shares held at year end by the company or cancellation / coverage o share plans.

Relative performance to Euronext Amsterdam (AEX)2008

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10

15

20

25

30

35


TNT AEX



Annual report 2008

Investor relations, shares, dividend and shareholder re

chapte

Relative performance to Euronext Amsterdam (AEX)1998-2008


AEXTNT

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0

10

20

30

40

Form o shares

Number o shares

Percentage o outstanding

ordinary shares

Bearer shares 348,832,900 96.89%

Non-ADS registered shares 1,603

ADSs1 11,188,921 3.11%

1 – Held by approximately 34 holders on record. Since some shares are held by brokers and other nominees or their clients, this number may not be representative o the actual number o

ordinary shares held by US residents or o the actual number o US r esident benefcial holderso ordinary shares.

0

20

40

60

80

100

200820072006200520042003200220012000

36 38 40

48

5763

73

85

71

37

34

Dividend TNT per sharein € cents

2008 includes the cash dividend and pro forma value of the proposed stock dividend

Relative performance to Euronext Amsterdam (AEX)since start of Focus on Networks strategy


AEXTNT

2006 20072005

6

12

18

24

30

36

2008

Dividend TNTTNT tries to meet shareholders’ return requirements long term through growth

in the value o the company, and short term through dividends and, incidentally,

tax exempt share repurchases or other returns rom excess cash. Following

its dividend guidelines, TNT intends to pay interim and fnal dividends annually

in cash and/or in shares. The TNT Reserves and Dividend Guidelines can be

viewed on TNT’s corporate website. In 2007, TNT announced its intention

to increase the dividend pay-out rom around 35% over 2006 o normalised

net income to around 40% by 2010, barring any unoreseen circumstances.Normalised net income is defned as proft attributable to the equity holders o

the parent adjusted or signifcant one-time and special items.

Share capital and sharesTNT’s authorised share capital is divided into 1,600,000,0 00 shares o €0.48

each and consists o 800,000,000 ordinary shares and 800,000,00 0 preerence

shares B. On 31 December 2008, 360,021,821 ordinary shares were issuedand outstanding and no preerence shares B were issued and outstanding. For

more inormation on TNT’s equity, see note 9 to the consolidated fnancial


Repurchase o shares/sharebuy-back programmesIn 2008, TNT repurchased 12.2 million shares, representing €306 million. All

these shares have been cancelled.




Investor relations, shares, dividend and shareholder returns

chapter 12

For urther inormation on the repurchase o shares in 2008, see note 9 to the

consolidated fnancial s tatements.

Major shareholdersSince most o the ordinary shares are in bearer orm, the analyses o

shareholdings by region and investor type are estimates based on the limited

inormation available to TNT through market sources. These estimates as o

95% Institutional / Other

5% Private investors

43% North America

6% Netherlands

23% Other Europe

25% United Kingdom

3% Other

Distribution of shares

The Financial Markets Supervision Act (Wet op het fnancieel toezicht ) imposes

a duty to disclose percentage holdings in the capital and/or voting rights in the

company when such holding reaches, exceeds or alls below 5%, 10%, 15%,

20%, 25%, 30%, 40% , 50%, 60%, 75% and 95%. Such disclosure must be made

to the Netherlands Authority or the Financial Markets (AFM) without delay.

The AFM then notifes the company.

On 4 March 2008, TNT received notifcation rom the AFM that it had received

disclosures under the Netherlands Financial Markets Supervision Act o a

substantial holding in the company o 5% by Lansdowne Partners Limited. On

25 July 2008, TNT received notifcation rom the AFM that it had received

disclosures o a substantial holding in the company o 6% by Allianz SE, which

was subsequently reduced to close to 0% as o 30 July 2008. On 4 August 2008,

TNT received notifcation rom the AFM that it had received disclosures o a

substantial holding in the company o 5% by UBS AG, which was subsequently

reduced to below 5% as o 8 August 2008 .

Other inormation

Peer group Total Shareholder

Return comparisonFor comparative reasons, the company has defned a peer group o publicly

listed companies with activities in similar industries in which TNT is active. This

peer group consists o Deutsche Post World Net (DPWN), Oester reichische

Post (AP), FedEx (FDX) and UPS. The comparative perormance in terms o

total shareholder returns in 2007 and 2008 is charted below.

31 December 2008 and expressed as a percentage o total shares outstanding

(excluding shares held by the company) on that date are:



Annual report 2008

Investor relations, shares, dividend and shareholder re

chapte

-60

-40

-20

0

20

AEXTNTDPWNEurotop300

transport

FDXUPSAP AEXTNTDPWNEurotop300

transport

FDXUPSAP

source: Bloomberg Professional (own currency based)

10.0%

-19.8%

-27.7%

-42.9%

-45.9%

-50.3%-49.4%

-31.5%

-3.5%

-17.6%

3.5%5.1%

7.5%

-11.2%

Total shareholder return

20072008

-60

-40

-20

0

20

AEXTNTDPWNEurotop300

transport

FDXUPS

source: Bloomberg Professional (own currency based)

-14.0%

-25.4%

-35.2%-32.0%

-27.6%

-33.0%

Total shareholder returnsince start of Focus on Networks strategy




Investor relations, shares, dividend and shareholder returns

chapter 12

Financial calendar or 2009

16 February Publication o 2008 ourth quarter and ull year results

8 Apr il TNT annua l general meeting o sha reholders

14 April Final ex-dividend listing

21 April Dividend payment date4 May Publication o 20 09 f rs t quar te r re sul ts

27 July Publication o 2009 second quarter and ha l year resul ts

28 July Interim ex-dividend listing

4 Augus t Interim d iv idend 2009 payment date

2 November Publication o 2009 third quarter results

3 December Ana lysts’ Meeting

PublicationsShare is a quarterly magazine distributed to 13,000 individual shareholders

and other interested readers. This magazine and other publications can also be

viewed and ordered through the corporate website.

WebsitesFor the latest and archived press releases, corporate presentations and

speeches, current share price and other company inormation such as TNT’sonline annual report and interim reports, please visit the corporate website at

group.tnt.com. TNT also invites you to visit the sites o TNT’s two main trading

brands: www.tnt.com and www.tntpost.nl. The inormation on these websites

does not orm part o this annual report.

TNT investor relationsThrough the company’s investor relations activities, TNT aims to provide

shareholders with accurate and timely inormation. TNT proactively and openly

communicates with institutions and private investors and with intermediary

groups such as analysts and fnancial journalists.

In addition to the quarterly, hal-yearly and yearly result presentations, TNT

maintains regular contacts with fnancial analysts and retail and institutional

investors through meetings, road shows, conerence calls and company visits.

In 2008, TNT visited investors in major fnancial cities in Europe, the United

States and Asia.

Visiting addressNeptunusstraat 41-63

2132 JA Hooddorp

the Netherlands

Mailing addressTNT Investor Relations

P.O. Box 13000

1100 KG Amsterdam

the Netherlands

Telephone: +31 20 500 6455

Fax : +31 20 500 7515Email: [email protected]

Internet site: group.tnt.com

Financial calendar or 2009



Annual report 2008

chapte

RISKS

Risk environment andresponse 2008/2009TNT’s Focus on Networks strategy has positioned the group as a market leading

– road based – Express networks operator in Europe and key emerging markets

globally, as well as a leader in the postal industry. The implementation o TNT’s

business and fnancial strategies is not without risk. The Board o Management

however believes that these strategies contain manageable execution risks

as they are based on TNT’s core strengths. A s described in chapter 7, TNT’scomprehensive risk management and internal control, integrity and compliance

ramework has been designed to identiy and prioritise principal key risks and

to develop mitigating actions and has as its oundation the Committee o

Sponsoring Organisations o the Treadway Commission (COSO) Enterprise

Risk Management – Integrated Framework (2004).

During 2008 the global economy entered into a severe recessionary phase,

accompanied by signifcant uncertainty in fnancial markets, deepening in

Europe par ticularl y in the second hal o the year.

This sharp change in the economic environment has had a substantial impact

on the results o the Express division. Volumes, overall and in particular in the

premium express market in Europe, decreased and are well below levels over

2007. TNT assumes continuing pressure on Express volumes in 2009.

Although TNT Mail is considerably less sensitive to economic cycles, it is preparing

its operations or higher levels o volume decline, largely resulting rom expected

increased substitution in the Dutch mail market. Although within the recent

decision o the Dutch government not to ully liberalise the mail market on 1 January

2009, the need or balanced postal sector labour conditions and a European level

playing feld is consistently reected, a government decision to liberalise the postal

market in the Netherlands during 2009 is still possible. Such decision might put

urther pressure on TNT’s mail volumes and competitive position.

TNT is adapting and aligning its strategic short and medium term ocus areas to

strengthen the company through the recessionary phase in the global economy,

whilst remaining alert to new growth opportunities provided by its strong

platorms.

The short term severe economic downturn requires the Express business

to protect revenue and margin levels. TNT Express has implemented and is

preparing a ull range o measures to reduce costs signifcantly in all areas o

operations, including air and road platorms on a response to expected sharply declining volumes.

The Mail business has prepared and is preparing its operations or a volume

decline rom around 4% in 2008 to around 6% over the years to come as a

result o higher levels o substitution and competition. As already disclosed in

chapter 5 o this annual report, Master Plans II and III will continue to adapt the

organisation and cost structure in 2009-2010 and the years thereater.

TNT’s fnancial st anding as per ultimo 2008 is solid and based on a balanced and

long term secured unding position. TNT will continue to ocus on sustaining

its good fnancial standing going orward by, amongst others, strict business

perormance and cash ow management, which will include targeted reduc tions

in working capital and capital expenditures. In addition, real est ate will continue

to be sold, provided market condi tions enable this to be realised close to normal

market values. TNT maintains its policy to retain a BBB+ credit rating.

On 4 December 2008, TNT announced targeted structural cost savings

totalling €270-330 million in the period 2009-2010. As part o this total, TNT

Express targets total structural savings o €170-210 million to be realised in ull

in 2010, o which €90-125 million are to be achieved in 2009. In addition, TNT

Express will be ready to implement ur ther volume dependent contingencies

up to an amount o €120 million savings in 2009.

TNT Mail will continue in 2009 the implementation o its current Master Plans

and start a new Master Plan. The targeted savings are €60-70 million in 2009

plus a urther €40-50 million in 2010. These savings could be enhanced as a

result o the ull impact o a successul fnalisa tion o the current collective labour

agreement negotiations that aim to establish salary costs or its operations

that are more in line with standard market practices. A new Master Plan III

will be launched or the period rom 2011 onwards, which aims at achieving

€200 million in recurring cost savings amongst others based on making exible

delivery models and structures and a higher level o part time labour.

TNT indicates a level o provisions or these cost optimisation initiatives in

the period 2008–2010 o €125–200 million and possible impairments up to

€150 million. The indicated range o provisions excludes the possible impact o

successul collective labour agreement negotiations, which will result in savings

related to labour costs being achieved at an earlier stage.

These cost savings and fnancial target s are subject to revision i the macroeconomic

and business situations change during 2009 beyond developments currently

assumed.

Principal key risks Whilst continuous emphasis has been placed on the identifcation o risks at

all levels o the organisation and the development o mitigating actions, the

constant changes in the environment in 2008 have made it challenging to keep

abreast o the rapidly evolving situation. During 2008, the risk profle within

TNT changed signifcantly with many previously reported inherent risks

becoming specifc within a very short period o time. TNT management has

reviewed the risk profle regularly throughout the year and will continue to do

so during 2009.

Understanding risks is a vital element o TNT ’s management decision making

processes. However it is not a means to an end but a process to support

management . No matter how good a risk management and control system may

be, it cannot be assumed to be exhaustive nor can it provide certainty that it will

prevent negative developments in TNT’s business and business environment

rom occurring. It is important to note that new risks could be identifed that

are not known currently and that any o the ollowing known risks could have

a material adverse eect on TNT’s fnancial position, results o operations,

liquidity and the actual outcome o matters reerred to in the orward-looking

statements contained in this annual report.




Risks

chapter 13

Specifc key risks in 2009The Board o Management has reviewed TNT’s risk profle and confrms that

the ollowing specifc key risks require ocused and decisive management

attention in the short term.

Sharp volume declines and shits in customer preerences rom premium

to economy products in TNT Express which are amongst others directly

related to the declining macroeconomic situation can lead to the need to

urther rationalise TNT’s Express operations and the air and road networks.

Although the Express division has a signifcant proportion o its operationalcosts outsourced there remains a risk that continued sharp volume declines

and shits in customer preerences as a result o the macroeconomic downturn

would require TNT to materially rationalise its air and road networks and

product oering to keep abreast o alling revenues and increasing costs. In

particular the shit rom premium international express next-day product to

international economy day-certain products might signifcantly change the

proft mix as well as the cost mix. Where the premium product has a relatively

small part o total volumes with a relatively large share in total revenue a

sharp volume decrease would only give limited short term opportunities to

cost adaptation in the fxed air and road network. I premium products would

decline sharply with other volumes only slightly increasing this would already

result in very limited cost adaptation in the networks. In this context TNT is

implementing large structural and variable cost savings programmes to protect

margin and proft levels. I the speed o implementation o these cost savings

is slower than planned or i TNT Express cannot keep up with the speed o

the declining GDP and resulting drops in volume, then this would signifcantly

inuence Express profts and proftability.

The loss o key customers/suppliers due to insolvency/bankruptcy in a

worsening macroeconomic environment or signicant urther decline in

volumes could have a signicant impact on TNT’s cash fows and operational

capabilities.

TNT’s larger customers in both Express and Mail could be aected by the

worsening macroeconomic situation to the extent that they have to fle or

bankruptcy. This would have an eect on TNT’s operational planning and

could negatively impact the volume on which TNT’s cost savings are based.

This could also result in bad debts which would have to be written o. TNT ’s

business model in both divisions is also dependant upon the extensive use o

subcontractors and other key suppliers. Bankruptcy o key subcontractors and

other suppliers could result in operational disruption and TNT’s ability to oer

its ull range o delivery solutions.

The urther liberalisation o the Dutch and EU postal markets could adverselyaect TNT’s revenues and protabilit y.

The process o liberalisation o the postal market within t he Netherlands, which

began in the late 1980’s, is continuing. Pursuant to the EU Postal Directive, as o

1 January 2006 the restriction that reserved the provision o letters up to 100

grammes exclusively to TNT (the reserved post al services) was reduced to 50

grammes. On 13 April 2006 the Dutch government decided to ully liberalise

the postal market in the Netherlands in 2008 on the condition that there is a

“level playing feld” with the British and German postal markets. The Dutch

government also agreed upon the proposal or a new Dutch Postal Act. The

proposal or a new Dutch Postal Act ollowed the vision o the Dutch Minis ter o

Economic Aairs on the postal market in the Netherlands, which was published

in 2004. As discussed in greater detail in chapter 11 o this annual report, this

new Dutch Postal Act addresses a number o issues that are directly relevant

to TNT’s business, including price controls and the scope o the mandatory

postal services. On 5 June 2007 the Dutch Second Chamber o Parliament

adopted the new Postal Act. The Postal Act will have to be approved by the

Dutch First Chamber o Parliament beore it enters into orce. The enactment

date is dependent on the condition o a level playing feld in real terms at the

postal markets o Germany and the United Kingdom, as well as on acceptable

employment conditions at the new postal operators in the Netherlands. From

December 2007, the Dutch junior Minister o Economic Aairs made use three

times o the so-called “emergency-brake procedure” when liberalisation was

postponed, lately as o 1 January 2009. The Minister based his decisions on two

arguments. Firstly, the lack o clarity about the level playing feld in Germany and secondly, the ongoing discussion in the Netherlands on labour conditions.

The new Dutch Postal Ac t may adversely aect TNT’s business, revenues and

proftability. For example, a possible expanded role or OPTA, the Supervisory

Authority or Post and Telecommunications in the Netherlands, in controlling

TNT’s price determination or downstream access or competitors might have

an adverse eect on TNT’s competitive position.

On 20 February 2008 the EU published a new Postal Directive 2008/6/EC to

amend Directive 97/67/EC as amended by Directive 2002/39/EC. This latest

Directive confrms liberalisation as o January 2011. Derogation is given to 11

Member States to open up their market as o January 2013. The reserved area

as a fnancing mechanism or mandatory postal services is abolished, while

allowing or a wide variety o other methods, such as tendering, public unds

and compensation unds. The new Direc tive also leaves the Member States

the discretionary powers to decide upon the scope o the mandatory postal

services. The new EU Postal Directive may adversely aect TNT’s European

Mail Networks business. For example, i the new EU Postal Directive provides

or insufcient guarantees, Member States can abuse national Universal Ser vice

Obligation regulation to protect their national operators. TNT ’s Mail business

could thereore be adversely aected by transposition and implementation o

the EU Postal Directive into national postal legislation as well as by non-postal

national legislation that might in practice aect the emergence o competition

in the postal market. An example o this is the introduction o an artifcially high

minimum wage in the German postal sector that could eectively unction as a

barrier to competition.

A downturn in the capital markets and/or a decline in interest rates may

increase the discounted present value o TNT’s dened benet pension und

liabilities, which in turn could require signicant additional unding by TNT.

TNT’s main Dutch “defned beneft pension und” has total assets o over €3.8

billion, some o which are unded by investments held in equities with a view

to benefting rom capital appreciation. The value o these securities may be

volatile and a downturn in the capital markets could signifcantly reduce thevalue o these assets. In addition a decline in interest rate may increase the net

present value o TNT’s pension liabilities. Should the coverage ratio o assets

divided by liabilities all below the minimum unding requirements prescribed by

De Nederlandsche Bank (DNB), TNT will be required to increase contributions

to the unds. I the assets were to lose a substantial amount o their value or

i, as a result o a decline in interest rates, TNT’s liabilities would substantially

increase, or both, TNT might be required to make large additional payments

into the unds, which could adversely aect liquidity over a number o years.

As a result, TNT’s main pension und was around €500 million below the

minimum unding requirements on 31 December 2008. The pension und will

have to submit a recovery plan to DNB beore 1 April 2009. This recovery

plan needs to outline measures on how the pension und will restore minimum

unding requirements within the three-year time rame as currently prescribed



Annual report 2008

chapte

by Dutch pension law. In addition, such a plan will have to outline how the

coverage ratio will reach the required level o around 120% within a timerame

o 15 years, subjec t to the risks involved in the pension und’s asset por tolio.

Such a plan is the responsibility o the pension und, which still has to decide

upon its course o action. Since the employer’s position and the outcome o

current collective labour agreement negotiations are unknown as yet, the exact

fnancial impact or TNT is still uncertain. However, the required additional

employer cash contribution to the pension und may have a material cash

impact on TNT. This is estimated at around €140 million in 2009 in addition to the usual annual employer contr ibution o around €100 million.

Measures taken to reduce costs, including employee redundancies, may not

achieve the results intended and could adversely aect TNT’s employee

relations, reputation, revenues and protabilit y.

The cost saving targets and initiatives in TNT’s press release o 4 December

2008 are based on assumptions and expectations which may not be valid i the

economic environment worsens. It may thereore be necessary or TNT to

restructure, redesign or integrate as necessary, various aspects o the company’s

operations in an eort to achieve additional cost savings, exibility and other

efciencies. In addition, restructuring o operations and other cost reducing

measures may not achieve the results intended and may invoke restructuring and

other costs and changes to TNT that adversely aect revenues and proftability.

The TNT Post Master Plans may require orced employee lay-os which may

damage TNT’s employee relations and reputation in the employment market.

I TNT is not able to reach agreement with trade unions on these Master Plans,

proftability could suer due to delays in or not reaching planned savings.

A downgrade in TNT’s credit rating may increase TNT’s nancing costs and

harm TNT’s ability to nance its operations and acquisitions, which could

negatively aect revenues and protabilit y.

Developments and trends in the world economy can have a material adverse

eect on TNT’s fnancial condition and/or results o operations and cash ows

which in turn may result in a downgrade o the credit ratings. A downgrade in

TNT’s credit rating may negatively aect the company’s ability to obtain unds

rom fnancial institutions, retail investors and banks. It may also increase TNT’s

fnancing costs by increased interest rates on outstanding debt that includes

a step-up in interest rates in case o a rating downgrade or may negatively

aect the interest rates at which TNT is able to re-fnance existing debt or

incur new debt. On 29 August 2007, S&P lowered its corporate credit ratings

on TNT to “BBB+” long-term/“A2” short-term with stable outlook rom “A–”

long-term/“A-2” short-term with a negative outlook (such ratings having been

issued by S&P on 10 March 2006). On 26 November 2008 Moody’s changed the “stable” outlook on the “A3” rating o the issuer rating and senior unsecured

debt ratings o TNT N.V. to “negative”. This “A3” rating with “stable” outlook

was issued on 27 March 2006. On that same date also the Commercial Paper

rating o TNT Finance B.V., a 100% owned and guaranteed fnance subsidiar y o

TNT, changed rom Prime-1 to Prime-2 and has been stable since.

Additional specifc andinherent key risksIn addition to the specifc key risks requiring ocus and attention in 2009, TNT

also has other risks which require ongoing monitoring and management.

These additional risks are described below and have been classifed by the risk

categories as defned by COSO – ERM and the categories also recommended

by the Corporate Governance Code Monitoring Committee. The risks are

urther classifed into specifc risks and inherent risks acing TNT. Specifc risksare risks that the Board o Management believes could negatively impact TNT’s

short to medium term objectives, whilst inherent risks are those risks that are

constantly present in the business environment, but which are considered

sufciently material to require disclosure and management. The sequence

that these risks are presented in no way reects any order o importance,

chance or materiality. The Board o Management believes that this approach is

comprehensive and prudent given the shit seen over 2008 with many inherent

risks, particularly business and fnance risks which have a direct correlation with

macroeconomic actors, becoming specifc.

Strategic risks

Specic strategic risks

Minimum wage legislation in Germany or the postal sec tor could adversely

aect TNT’s ability to grow its Mail business outside the Netherlands.

TNT challenged the German government regarding the minimum wage, as it

considered this minimum wage unconstitutional. In its judgement o 7 March

2008, the administrative court in frst instance (Verwaltungsgericht ) held that

the mandatory €9.80 minimum wage is invalid. The German government fled

an appeal against that decision with the administrative court in second instance

(Oberverwaltungsgericht ). On 18 December 2008, the Oberverwaltungsgericht

confrmed the decision o the court in frst instance. However, the court also

ruled that TNT’s claim, being one o three claimants, was not admissible and

reerred TNT’s claim to the labour courts. It is likely that TNT will fle an appeal

against the inadmissibility o its claim, because the decision o the court on

TNT’s inadmissibility is not in line with recent jurisprudence as to claims o this

nature.

The German government fled a urther appeal (Revision) against the decision to

the Federal Administrative Court ( Bundesverwaltungsgericht ) in Leipzig.

In view o air competition in the postal market, the gener ally binding validity o the minimum wage agreement o the employers’ association or postal ser vices

is unacceptable to TNT since it would seriously jeopardise the liberalisation

o the German mail market and TNT’s ability to build a sustainable proftable

business. Similar barriers in national mail markets elsewhere could severely

hamper TNT’s successul implementation o its strategy in the European mail

market.

The acquisition and integration o acquired businesses involves signicant

challenges and costs and may not be successul, which could adversely aect

TNT’s revenues and protability.

TNT has entered into and will rom time to time continue to enter into

(signifcant) acquisitions because growth through acquisitions remains a key

element o TNT’s Focus on Networks strategy.




Risks

chapter 13

TNT’s acquisition plans are supported by multi-year cash ow and proft

projections identiying value creation opportunities based on sustainable

proftable growth. The plans are careully developed using the best possible

analysis and judgement. The acquisition plans are discussed, where appropriate,

with the Supervisory Board in detail prior to approval. These plans, however,

are inherently uncertain and provide execution and market risks which might

have been overlooked or incorrectly orecasted.

The integration o acquired businesses creates a requirement or change

in both the acquired businesses and the TNT organisation, which leads touncertainty. The integration o the companies TNT has acquired normally

results in signifcant challenges and change related costs. The uncer tainty and

culture dierences, as well as the demands on management and resources to

achieve the integration o the newly acquired businesses result in a risk that the

integration is not, or is only par tly successul and TNT’s growth strategy may be

delayed, or not be successully achieved.

I an existing, or uture integration eort is delayed, or is not successul, TNT

may incur additional costs. The value o the investment in the acquired company

may decrease signifcantly and have an adverse eect on TNT’s revenues and

proftability.

Changes in market conditions and/or relationships with TNT’s joint venture

partners may require TNT to revise its strategies, which could adversely

aect TNT’s protability.

Changes in market conditions may lead TNT to revise the strategies in which joint

ventures were concluded. Revised strategies may lead TNT to demerge these

businesses or end these joint ventures. The resulting employment reduction or

other signifcant restructuring costs could impact TNT’s proftability.

Inherent strategic risks

The increasing substitution o alternatives or TNT’s Mail delivery services

could reduce the revenues and protability o TNT’s Mail business and

adversely aect TNT’s revenues and protabili ty.

TNT’s Mail business is an integral part o TNT’s total business and during

2008 represented 38.1% o TNT’s group operating revenues and 55.1% o

TNT’s group EBITDA. TNT’s postal Mail business delivers inormation 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 inormation aster and,

in many cases, at a lower price than tr aditional mail services. Due to increased

substitution, among other actors, traditional mail volumes in the Ne therlandshave decreased in recent years, and TNT expects this downward trend in mail

volumes to continue or even deepen in the coming year s. An increase in the use

o these substitute technologies would likely result in a ur ther decrease in the

use o TNT’s traditional mail services. I substitution continues on a large scale,

it could adversely aect the volumes, revenues and proft ability o TNT’s Mail

business and the company as a whole.

Operational risksSpecic operational risks

TNT depends on a number o inrastructure acilities or which the group has

limited or no comparable back-up acilities, so i operations were disrupted at

one or more o these acilities, TNT’s revenues and protability and business

operations would suer.

A portion o TNT’s inrastructure is concentrated in single locations or which

there are limited or no comparable back-up acilities or very expensive all-back scenarios in the event o a disruption o operations. An example o this is the

TNT European Express air hub in Liège, Belgium. The operation o the TNT

acilities involves many risks, including power ailures, the breakdown, ailure or

substandard perormance o equipment, the possibility o work stoppages or

civil unrest, natural disasters, catastrophic incidents such as airplane crashes,

fres and explosions, and normal hazards associated with operating a complex

inrastructure. I there was to be a signifcant interruption o operations at one

or more o the company’s key acilities and operations could not be transerred

or only at very high costs to other locations, TNT might not meet the needs o

its customers, and business and operating results would be adversely aected.

Incidents resulting rom the transport o hazardous materials and condential

consignments or a major incident involving TNT’s sorting centres,

warehousing acilities, air or road feet may adversely aect the group’s

revenues, protability, reputation and share price.

TNT transports hazardous materials or a number o customers in the

automotive, biomedical and chemical industries. The haz ardous consignments

include airbags, batteries, paint, blood samples, medical substances, dry ice,

and chemicals. As part o TNT ’s Mail services, the company may also transport

hazardous or dangerous goods without having been notifed about the

nature o the goods transported. TNT aces a number o risks by transpor ting

these materials, such as personal injury or loss o lie, severe damage to and

destruction o property and equipment, and environmental damage. Incidents

involving these materials could result rom a variety o causes including sabotage,

terrorism, accidents or the improper packaging or handling o the materials.

In addition, TNT transports confdential and sensitive consignments on behal

o some o its customers. TNT does not always know the confdential and

sensitive nature o these consignments and customers may choose to enter

consignments into TNT’s network without registering the consignment with

the result that they cannot be tracked and traced.

I a signifcant incident occurred involving the company’s handling o dangerousand hazardous materials or i confdential consignments got misplaced or lost,

TNT’s operations could be disrupted and the company could be subject to a

wide range o additional measures or restrictions imposed on the company by

local or governmental authorities as well as potentially large civil and criminal

liabilities. This could negatively aect the group’s revenues and proftability. A

signifcant incident, particularly a well-publicised incident involving potential or

actual harm to members o the public, could also damage TNT’s reputation.

As an owner and operator o a large air and road eet, TNT is involved in

activi ties which expose the company to liability in the case o a major air or road

incident, not only or employees, acilities and third party proper ty, but also

or the general public. An incident involving the company’s aircrat or vehicles

could cause signifcant loss o lie and property and could adversely aect TNT’s

revenues, proftability, reputation and share price.



Annual report 2008

chapte

TNT may not accurately orecast uture inrastructure requirements, which

could result in excess or insucient capacity and negatively aect TNT’s

revenues and protability.

In order to maintain market position and uture growth, TNT must make on-going

investments in inrastructure such as aircrat, trucks, and depots. Inrastructure

investments are based on orecasts o uture capacity requirements. It may be

difcult to orecast accurately or uture requirements, since they are based

on a large number o actors, including actors beyond the direct control o

TNT management and in particular the changing macroeconomic conditions

and changes in governmental regulation. As a consequence, there may be amismatch between investment and actual requirements. I TNT underestimates

the group’s uture capacity requirements, it will not be able to meet the needs

o customers and could lose business, market share, revenues and profts. I

TNT overestimates uture needs, or i major contracts are cancelled by

customers, it may exper ience costly excess capacity and this could adversely

aect proftability.

Inherent operational risks

Strikes, work stoppages and work-slowdown by TNT’s employees and the

terms o new collective labour agreements could negatively aect TNT’s

revenues and protability.

The success o TNT’s business also depends upon avoiding strikes, work

stoppages and work slow-down by TNT’s employees. Industrial action by large

trade unions or even relatively small, but key groups o TNT’s employees, such

as airline pilots, could seriously disrupt TNT’s operations. Industrial action

may occur or reasons unrelated to TNT’s collective labour agreements with a

particular trade union or group o employees. For example, TNT’s employees

may reuse crossing picket lines established by other trade unions o other

companies. The collective labour agreement, aecting approximately 57,000

employees in the Netherlands, is subject to a renewal in April 2009. I TNT is

not able to renew this agreement or other key agreements with its employees,

and a strike, work stoppage or work slow-down occurs, TNT’s revenues and

proftability could be adversely aected.

TNT’s business may be negatively aected by the terms o collective labour

agreements that TNT concludes with its employees. These terms could include

increases in compensation and employee benefts, and less exible work

processes and conditions than those o TNT’s competitors, and limitations on

uture work orce reductions and other actors that make TNT’s workorce less

mobile. TNT’s proftability could suer i TNT is not able to conclude collective

labour agreements on satisactory terms with its employees.

Increased security and anti-terrorism requirements could impose substantial

additional costs on TNT, especially at TNT Express.

As a result o increased concerns about global terrorism and aviation security,

governments and airline operators around the world are adopting or are

considering adopting stricter security requirements that will increase operating

costs or businesses, including those in the transportation industr y. For example,

o recent years the EU has increased the security requirements or air cargo,

which has many implications on customs clearance processes. In addition, many

aviation regulators around the world are proposing mandatory use o x-ray

screening equipment. It is not possible to ully determine the eec t that these

new rules or changed policies will have on TNT’s cost struc ture or its operat ing

results. It is possible that these rules or other uture security requirements or

air cargo carriers could impose material costs on TNT.

TNT aces risks related to health epidemics and other outbreaks o

contagious diseases, including pandemic infuenza, avian infuenza and SARS.

TNT’s business could be adversely aected by the eects o avian inuenza,

SARS or another epidemic or outbreak. Since 2005 the World Health

Organisation and other health monitoring bodies have reported outbreaks

o a highly pathogenic avian inuenza, caused by the H5N1 virus, in certain

regions o Asia and Europe and there have been reports on the occurrences o

avian inuenza in various parts o China, Indonesia, Thailand and other South-

east Asian countries, including some confrmed human cases. An outbreak o

avian inuenza in the human population could result in a widespread healthcrisis that could adversely aect the economies and fnancial markets o many

countries. Additionally, any recurrence o SARS, a highly contagious orm o

atypical pneumonia, similar to the occurrence in 2003 which aected China,

Hong Kong, Taiwan, Singapore, Vietnam and certain other South-east

Asian countries, would also have similar adverse eects. These outbreaks o

contagious diseases and other adverse public health developments would have

a material adverse eect on TNT ’s business operations. These could include

TNT’s ability to ship consignments or otherwise make deliveries o products

originating in aected countries, as well as temporary closure o TNT ofces or

other acilities. Such closures or travel or shipment restrictions would severely

disrupt TNT’s business operations and adversely aect its fnancial condition

and results o operations. TNT has implemented measures to develop written

preventive procedures and contingency plans to mitigate any uture outbreak

o avian inuenza, SARS or any other epidemic, but the impact o any outbreak

is difcult to gauge and these plans may not be ully eect ive.

TNT’s operations and earnings are subject to risks related to the impact o

climate change.

TNT believes that concern about climate change will lead to government action

and/or regulation that will require the company to urther manage emissions

rom its ground and air eet. A s such, there is a risk to uture operations and a

compliance risk or existing acilities and TNT’s eet, i the company is not able

to demonstrate adequate emissions management. Realisation o these risks

could have an adverse impact on operational perormance and TNT’s fnancial

position.

Legal and regulatory risks

Specic legal and regulatory risks

TNT is exposed to various global and local legal and regulatory risks that

may have a material adverse eect on the results o operations and TNT’srevenues and protability.

TNT operates around the globe and provides a worldwide ser vice with acilities

in many countries, which means that the company is conronted with complex

legal and regulatory requirements in many jurisdictions. These include taris,

trade barriers and requirements relating to withholding taxes on remit tances

and other payments. In many o the jurisdic tions in which the company operates ,

in particular emerging markets such as China, India, Brazil and Russia, aspects

o the developing legal system (including the ability to enorce contracts, an

independent and experienced judiciary, and similar actors) create an uncert ain

environment or investment and business activity. These risks and complexities

will increase in the pursuit o the Focus on Networks strategy to expand

operations to new markets. TNT’s overall success as a global business depends,

in part, on its ability to succeed in dierent economic, social, political and legal

conditions. TNT may not succeed in developing and implementing policies and




Risks

chapter 13

strategies that are eective in the locations where TNT’s business is conducted.

Failure to do so may have a material adverse eect on business operations and

on TNT’s revenues and proftability.

Inherent legal and regulatory risks

Unavourable decisions o competition authorities concerning joint ventures,

acquisitions or divestments could restrict TNT’s growth, strategic progress,

protability and ability to compete in the market or TNT’s services.

As a part o TNT ’s Focus on Networks strategy, rom time to time TNT seeksalliances with or acquires shares in companies that complement the company’s

strategy, or TNT seeks to divest part o it s business. Any approval o a joint

venture, an acquisition or a divestment o shares or a business by competition

authorities may contain certain restrictions or conditions with respect to the

intended transaction.

TNT may not be able to implement a transaction as contemplated in compliance

with any restrictions or conditions imposed by the Directorate General o

Competition o the European Commission or national competition authorities,

and these restrictions or conditions may negatively aect TNT’s revenues and

proftability. I TNT is unable to implement a oreseen transaction under the

restrictions or conditions applicable, or i the intended transaction is prohibited,

the company may be unable to develop alternative approaches. This would

have an adverse eect on TNT’s ability to execute its strategy or ocus on the

company’s core business.

Compliance with regulations and the securing o eective fight slot times

may result in signicant changes to the company’s operations and could limit

TNT’s fexibility in operating its business and negatively aect costs and

protability.

TNT is subject to a wide variety o complex and stringent aviation, transpor tation,

environment, employment and other laws and regulations in the Netherlands,

the EU and the other jurisdictions where it operates. Existing regulations are

subject to constant revision and new regulations are constantly being adopted.

The interpretation and enorcement o such laws and regulations vary and could

limit TNT’s ability to provide its services in certain markets. It is uncertain whether

existing laws and regulations or uture regulatory, judicial and legislative changes

will have a material adverse eect on TNT, whether national or international

regulators, competition authorities or third parties will raise material issues with

regard to the company’s compliance or non-compliance with applicable laws and

regulations, or whether other regulatory activities will have a material adverse

eect on its business, revenues and proftability.

In the TNT Express businesses, the division operates various types o aircrat

throughout Europe and between Europe and Asia. As a result, TNT is required

to comply with a wide variety o internationa l and national laws and regulations.

In some o the markets in which the company operates, regulations have

been adopted (or proposed) which impose night-time take-o and landing

restrictions, aircrat capacity limitations and similar measures in order to

address the concerns o local constituencies.

In addition, as the provider o time sensitive delivery services, the TNT Express

business needs to secure adequate and eective ight time slots rom airport

coordination (or other local) authorities in all the countries and airport s TNT

operates into and out rom. The timing or limited availability o these slots could

have an impact on the efcient operations o the TNT Express time sensitive

air and road networks and could result in penalties or ailing to meet the

company’s on-time delivery service commitments or increased costs or the

case where TNT would be obligated to purchase slots rom third parties to

maintain its service levels.

TNT relies on night-time operations at the air Express hub in Liège, Belgium, or

a substantial part o its international Express business. A curtailment o night-

time take-os and landings at any o TNT’s key acilities, such as Liège, would

likely harm the division’s business. Some governments have imposed st ringent

new security measures on air carr iers that could result in additional operating

costs. TNT’s ailure to comply with these measures or the costs o complyingwith existing or uture government regulation, could negatively aect revenues

and proftability. In addition, existing or uture regulation on transport o goods

may negatively aect TNT’s ability to perorm services to meet customer needs

or may increase the costs o providing these services.

The legal concept o limited liability or loss or damage o goods carried by

TNT is increasingly being challenged and this may result in increased exposure

to claims.

TNT transports goods under the conditions o the international conventions

in respect o the carriage o goods by air (the Warsaw Convention) and by

road (the Convention on the Contract or the International Carriage o Goods

by Road). These conventions contain provisions that limit TNT’s liability in the

event that TNT loses or damages shipments belonging to its customers. In the

past this principle was generally accepted as normal business practice, but in

recent years courts and regulators, in an increasing number o jurisdictions, are

more sympathetic to allegations o “gross negligence” or “lack o due care”,

thereby setting aside the principles o limited liability. This trend exposes TNT

to more and increased loss and damage claims. TNT has covered this additiona l

exposure by its insurance arrangements. However, i this trend continues it

could defnitely result in signifcantly higher insurance costs and thus in increased

fnancial exposure and adversely aect TNT ’s proftability.

Determination that subcontractors were to be considered TNT employees

would aect TNT’s current business model, causing operating expenses to

rise and net income to su er.

In various jurisdictions, TNT uses subcontractors to perorm aspects o the

group’s business, such as picking-up and delivering parcels, as is common

practice in the transportation industry. In cert ain jurisdictions, the authorities

have brought criminal and/or civil actions alleging that subcontractors or their

employees engaged by TNT are to be regarded as TNT’s own unregistered

employees. I these allegations were upheld by a court, TNT would incur, in

addition to criminal sanctions, costs such as social security contributions, wage

taxes and overtime payments in respect o such employees. Subcontractorscould also bring civil actions seeking the reclassifcation o subcontractor

relationships in employment contracts. I these actions were successul,

operating expenses would rise and net income would suer.

Employee and even (sub)contractor and supplier misconduct could result

in nancial losses, the loss o clients and nes or other sanctions by the

governments o the countries in which TNT does business.

Despite its Integrity Programme, TNT may be unable to prevent its employees

rom engaging in misconduct, raud or other improper activities that could

adversely aect TNT’s business and reputation. Misconduct could include

the ailure to comply with applicable laws or the TNT Business Principles, or a

breach o confdentiality. The precautions taken by TNT to prevent and detec t

this activity may not be eective. Investigations o suspected raudulent activity

could expose TNT to additional sanctions i an investigation is ineective or



Annual report 2008

chapte

hampered by local legal restrictions. As a result o employee misconduct, TNT

could incur fnes and penalties imposed by governments in the countries in which

it does business. Any such fnes or penalties could lead to adjustments to the

fnancial statements and resulting liabilities which could reduce proftability. In

addition, negative publicity in relation to employee misconduct could negatively

aect TNT’s reputation, harm its ability to recruit employees and managers and

reduce revenues.

The same risks apply with regard to misconduct by TNT’s (sub)contractors

and suppliers. In recent years court and regulators have increasingly heldcompanies liable or acts o their independent (sub)contractors and suppliers.

In view o this trend TNT has amongst others communicated the TNT Business

Principles to its (sub)contractors and suppliers and is providing training to

enhance compliance. However, such communication and training activities

and their eectiveness may be impeded or made impossible by the act that

in certain jurisdictions authorities have started actions against TNT alleging

that subcontractors or their employees engaged by TNT are to be regarded as

TNT’s own unregistered employees.

TNT’s strategic objectives could be subject to political debate and adverse

outcome.

Political decision making could have an adverse inuence on TNT’s ability to

achieve its Focus on Networks strategy and carry out it s operations eectively.

Postal regulation is oten subject to ferce political debate. For instance, the

liberalisation o the Dutch postal market seems to go hand in hand with an

increase in regulatory and supervisory controls or the national postal

operator, TNT Post. Although the general regulatory trend in Europe is

towards liberalisation o the postal sector, experiences in Germany and the

United Kingdom also show that the political support or de acto liberalisation

is tempered by concerns over labour conditions and the sustainability o

the Universal Postal Service. In emerging markets like China and India,

modernisations o postal regulatory rameworks have a tendency to lead to

stricter policies towards mail and express ser vices.

Financial risks

Specic nancial risks

Intensiying competition may put downward pressure on prices and could

have an adverse eect on TNT’s revenues and protability.

TNT competes with many companies and services on a local, regional,

European and international level. TNT’s competitors include the incumbentpostal operators o other nations in Europe, Asia, Australia and the United

States, motor carriers, express companies, logistics service providers, reight

orwarders, air couriers and others. TNT expects competition to intensiy

in the uture in all o its core business areas. Targeted, aggressive actions by

competitors may negatively impact TNT’s prices. In the Netherlands, TNT’s

present market share in the mail business results rom being the ormer

government operated monopoly. TNT expec ts its market share to erode due

to serious competition and, in the longer term, the continuing liberalisation o

the Dutch mail regulatory regime. In Europe, TNT continues to ace strong

competition in both its Mail and Express businesses. TNT’s strategy ocuses on

a dierentiated product and price approach and the quality o services related

to price rather than on price discounts. Nevertheless, increased competition

may orce prices or TNT’s services down and thus cause TNT’s revenues and

proftability to decrease.

The trends towards liberalisation o European postal markets may also result

in urther consolidation within the mail and express businesses as competitors

seek to expand into newly opened geographic markets and ormer state postal

monopolies enter into acquisitions or alliances in order to expand the range and

geographic coverage o their services. Consolidation within TNT ’s businesses

may result in increased competition and, as a consequence, adversely aect

TNT’s business, revenues and proftability.

TNT is exposed to currency and interest rate fuctuations that could have an

adverse eect on the company’s results and nancial condition as well as onthe comparability o TNT’s nancial statements.

Part o TNT’s total revenues and operating expenses as well as assets

and liabilities are denominated in currencies other than the euro. The main

sensitivities on revenues can be derived rom geographical segmentation as

provided in the additional notes to the fnancial st atements.

For the year 2008, or example, around 29% o revenues and around 23% o

asset book value is held in countries outside o euro zone Europe. As TNT

expands its international operations, it can be expected that an even greater

portion o its revenues, costs, assets and liabilities will be denominated in

non-euro currencies. The exchange rates between these currencies and the

euro may uctuate substantially. As a result, currency uctuations could have

a material adverse eect on TNT’s results and fnancial condition in any given

reporting period and may aect the comparability o TNT’s fnancial statements

rom period to period.

Management has set up a Group Policy to require all group companies to

manage their oreign exchange risk against the unctional currency. Group

companies are required to hedge material balance sheet exposures via the use

o Foreign Exchange (FX) derivatives with the Group Treasury department,

whereby a fnancing company operated by the Group Treasury department, as

‘in-house bank’ trades these FX der ivatives back-to-back with external banks.

Currency exposures can be evaluated at revenue, earnings and balance

sheet level. On balance, the most important exposures are in US dollar and

British pound.

TNT’s revenue in the US and in the United Kingdom is €24 million and €1,445

million respectively. I the euro, on average over the year 2008, had weakened/

strengthened 10% against the US dollar compared to the average FX rate or

the year, then the 2008 US revenues, with all other variables held constant,

would have been approximately €0-5 million lower/higher. Similarly, i the

euro on average would have weakened/strengthened 10% against the Britishpound with all other variables held constant, the revenue would have been

approximate ly €130-160 million lower/higher.

At an earnings level TNT was a net payer o both the US dollar and the British

pound. I the euro, on average over the year 2008, had weakened/strengthened

10% against the US dollar compared to the average FX rate or the year, then

the 2008 proft beore income tax, with all other variables held constant, would

have been approximately €15-20 million lower/higher. Similarly, i the euro on

average would have weakened/strengthened 10% against the British pound

with all other variables held constant, the proft beore income tax would have

been approximately €0-5 million lower/higher.

In terms o a revaluation o oreign currency assets and liabilities as at 31 December

2008, i as at 31 December 2008, the euro had weakened/strengthened 10%




Risks

chapter 13

against the US dollar with all other variables held constant, the proft beore

income tax would have been €1 million higher/lower. I at 31 December 2008,

the euro had weakened/strengthened 10% against the British pound with all

other variables held constant, the proft beore income tax would have been

€0-5 million higher/lower.

Currently no net investment hedges are outstanding. However, signifcant

acquisitions and local debt is usually unded in the currency o the underlying

assets. These orm a natural hedge against oreign currency cash ow and

earnings risks.

Part o TNT’s borrowings and leases are against oating interest rates. These

oating interest rates may uctuate substantially and could have a material

adverse eect on TNT ’s results and fnancial condition in any given reporting

period.

TNT’s Group Policy is to limit the worst case interest cost over a seven year

period as a percentage o EBITDA with a statistical 95.0% level o confdence.

As at 31 December 2008, i interest rates on debt and deposits had been 1%

lower/higher with other variables held constant, the proft beore income tax

would have been €2 million lower/higher on an annualised basis. Due to the

outstanding interest rate swaps, equity would be lower/higherby €11 million

had interest rates been 1% lower/higher.

Although TNT generally enters into hedging arrangements and other

contracts in order to attempt to reduce the company’s exposure to currency

and interest uctuations, these measures may be inadequate or may subject

TNT to increased operating or fnancing costs. See also notes 29 and 30 to the

consolidated fnancial statements o TNT N.V.

A decline in the value o the euro could reduce the value o any investment in

TNT and any dividends received.

Since its introduction on 1 January 1999, the value o the euro relative to the

US dollar has uctuated widely. Fluctuations in the exchange rate between the

US dollar and the euro will aect the US dollar equivalent o the euro price

o TNT’s euro-denominated shares, TNT’s non-listed American Depositary

Receipts (ADRs) and the US dollar value o any cash dividends. I the value o

the euro relative to the US dollar declines, the market price o TNT’s ADRs

is likely to be adversely aected. Any decline in the value o the euro would

also adversely aect the US dollar amounts received by shareholders on the

conversion o any cash dividends paid in euro on TNT’s ADR s.

In more general terms, i an investor has a unctional currency that is other than Euro, its investment expressed in its own unctional currency is similarly

exposed to a decline o the euro against that other currency. Please reer to

note 30 o the fnancial statements

Changes in markets, useul lives o assets and TNT’s business plans have

resulted and may in the uture result in substantial impairments o the carrying

value o assets, thereby reducing net income.

Regular review o the carrying value o assets (including intangible, tangible

and fnancial fxed assets) may in the uture require TNT to recognise

additional impairment charges. Amongst others, events in the markets where

TNT conducts its businesses, including current trading, macroeconomical

developments, signifcant declines in stock pr ices, market capitalisations and

credit ratings o market participants, as well as TNT’s ongoing review and

refnement o its business plans, are elements included in these regular reviews.

In addition, TNT recognises increased depreciation and amor tisation charges

i it is determined that the useul lives o TNT’s fxed assets are shorter than

originally expected.

Inherent nancial risks

The multinational nature o TNT’s business could expose the company to

uncertainty in eect ive tax planning and regulatory reviews and audits.

Multinational groups o the size o TNT are exposed to varying degrees

o uncertainty related to tax planning and regulatory reviews and audits.

TNT accounts or its income taxes on the basis o its own internal analyses,

supported by ex ternal advice. TNT continually monitors its global tax position,

and whenever uncertainties arise, TNT assesses the potential consequences

and either accrues the liability or discloses a contingent liability in its fnancial

statements, depending on the strength o the company’s position and the

resulting risk o loss.

With regard to the key risks as mentioned and other risks TNT’s insurance

policy is based on the conservative approach o retaining requency losses

(sel insured) and transerring “catastrophe exposures” to the insurance

market.

As requency losses (such as cargo and vehicle claims) are o an operationa l and

customer service nature, TNT believes that sel insurance is the best method

to motivate operational units to address t he underlying causes o these losses.

TNT’s total sel insured requency claims are struc tured via an in-house captive

insurance company and capped on an annual basis via reinsurance. Dur ing 2008,

TNT’s total annual retention cap on these losses was €5 million.

TNT’s “catastrophe exposures” are insured in the traditional insurance markets.

These include aviation, property and business interruption, general liability,

raud, and director and ofcers’ liability insurance. TNT has a strict policy to

transer risks only to insurer s with a rating o A- or higher, and this is 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 it operates, and all insurancepolicies are thereore tailor-made to TNT’s unique requirements. In addition,

current insurance arrangements also need to support strategic developments

and the changing risk profle o the company.



Annual report 2008

PUBLISHED BY

Publisher

Text

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Lithography

and printing

Paper

Binding

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 o Commerce AmsterdamReg. No. 27168968

TNT

Fabrique Communications and Design

Anton Corbijn

Cendris Print Management

Thieme Amsterdam

Cover – Munken Lynx 400 - 250 gr/ m²

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Binderij Hexspoor B .V.

TNT Annual Report 2008

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