TPG

From the CEO

Letter to shareholders

• Margin improvements across the board
• Divisions united under one brand and TNT1
• Strong € 1 billion operating cash flow performance

Delivering more through great people

Dear shareholders and other readers,

Our business is all about delivering. A letter to a friend across town. Business parcels to the other side of the world. Component parts to an assembly line. Container shipments across the sea. Whatever the cargo, we ensure that goods and documents reach their destinations reliably and efficiently. Delivering is our core competence. But we take it a step further.

In everything we do, we aim not only to deliver, but to deliver more. More service for our customers. More opportunities for our employees. More value for our shareholders. And more benefits for our world. And we can deliver more because we have great people. It is through their work and dedication that our company exists.

Our group strategy for leadership

In the beginning of 2004 we introduced a strategy for our group, setting out a clear direction and ambitions. Our mission statement identified our key stakeholders and became the basis for a push to further enhance what we believe is our leading position. One element of our strategy is a move to one brand – TNT – for all our businesses. This move is a clear signal of our commitment to being one company with a comprehensive strategy and shared objectives. Together, the TNT strategy and all its elements add up to what I have come to call the TNT house. This house represents all that TNT stands for and all that we aspire to achieve.

Our house is underpinned by a solid foundation – our three divisions, Mail, Express and Logistics. The next layer of building blocks is formed by the five areas of our TNT1 programme human resources, shared services, key account management, information and communication services and procurement. Next come our three growth initiatives: postal consolidation, China and freight management. In between the building blocks is the mortar that binds our house and makes it strong: our mission, standards, corporate governance, social responsibility endeavours and our brand. Covering the house are our four critical success factors: satisfied customers, engaged employees, shareholder value and work for the world.

TNT mission

Our mission is to exceed customers’ expectations in the transfer of their goods and documents around the world. We deliver value to our customers by providing the most reliable and efficient solutions in distribution and logistics.

We lead the industry by:

• Instilling pride in our people
• Creating value for our shareholders
• Sharing responsibility for our world.

TNT standards

• Aim to satisfy customers every time.
• Challenge and improve all we do.
• Be passionate about our people.
• Act as a team.
• Be honest, always.Measure success through sustainable profit.
• Work for the world.

Built on a firm foundation

So what is the state of the TNT house? I’ll start with the foundation. Overall, our three divisions produced strong results in 2004. They weathered the mixed economy and delivered margin improvements across the board, resulting in an operational cash flow of €1 billion. This healthy development enabled us to buy back around 4% of our stock when the State of the Netherlands decided to reduce its holding in our company to around 19%.

The cost flexibility programme we launched in our mail division in 2001 helped employees there to do exceptional job countering 1.5% decline in addressed mail volumes in the Netherlands in 2004. In fact, the volume decline was actually higher than 1.5%; in 2004, a few additional working days due to holidays falling on weekends, for instance, masked a higher rate of decline. Nonetheless, our mail operating margin reached an outstanding 22.2%.

After years of discussions, the Dutch parliament approved the Postal Vision in 2004, setting forth a clear path towards liberalisation of the Dutch mail market. The plan calls for the Dutch mail market to continue to welcome competition, with full liberalisation from 2007, assuming that the mail markets in the United Kingdom and Germany are also liberalised by that date. Looking to 2005, although there is no guarantee, I expect organic growth in European Mail Networks to increase further, compensating for the continuing volume decline in the Netherlands. This development should lead to our overall mail revenues remaining stable, though we do not expect our mail margin to remain at the high level of 2004.

Express continued its impressive record of positive quarterly yields, reaching an operating margin of 7.9%. Operationally, the division has delivered great results, with all business units across all geographies contributing. In the coming year, I hope to see further improvement of the operating margin as we move towards our target of a 10% operating margin by 2007.

We are pushing forward with our strategic aim to build the number-one express company in Europe. Further investments in the TNT Express European air hub in Liège, Belgium, as well as in our European road network will expand our capabilities. We will continue to strengthen our domestic positions in a number of countries through acquisitions.

By restoring its margin to 3.7% – excluding the contribution of the Wilson Logistics Group, which we acquired in August 2004 – Logistics also contributed to our good results in 2004. The successful implementation of the Transformation through Standardisation programme helped our logistics employees overcome the difficulties of 2003.

We’ve made good progress in turning around logistics operational performance, bringing three of the four loss-making business units back into the black. The one unit where the turnaround has not yet taken hold is France.

In 2005 I foresee continued operating improvements and we need to find a solution for France, as well as an ongoing push for standardisation across the entire logistics division. We must get better still at turning our now-significant scale into a positive trend. We are hopeful that revenue growth will be high, mainly driven by the Wilson acquisition.

TNT1

Three of the five TNT1 projects entered implementation phases in 2004, and these will create the first concrete results this year. We are targeting extra revenues through key account management. The procurement team is set to book its first wave of savings through streamlined purchasing initiatives, and we have begun standardising our human resources management across our global business.

But, to me, TNT1 is more than a programme intended to achieve extra revenues and cost savings through closer cross-divisional cooperation. It is evidence of the fact that our company is one, with a shared vision and mission, and shared standards. We are one company, 162,000 people strong, striving for leadership in our industry.

And how better to express our aim to be one company than by moving all parts of the group to one brand. We compete on a global level, and operating under one brand will let us make the most efficient use of our marketing budget, as well as to show one face to our customers, who increasingly look to us for multicountry, full-service contracts.

The re-branding will have the biggest impact in the Netherlands, where our company has been part of everyday life for more than two centuries. Exchanging TPG Post red for TNT orange will take some getting used to by both our customers and our employees. The changeover will be gradual, from 2006, to limit costs and to allow time for all our stakeholders to become comfortable with the change. And one thing I can promise: The re-branding will not change the heart of our company. We will continue to be what we are – a great mail, express and logistics company, delivering more through great people.

Our three growth initiatives

The top floor of our TNT house is dedicated to growth. Growth brings energy and excitement and new opportunities for our talented and ambitious employees and our shareholders alike. We believe we made great progress in all three strategic growth areas in 2004 – postal consolidation, China and freight management. 2004 saw the overture of postal consolidation in Europe when the Danish government offered for sale up to 25% of Danish Post. We have entered a nonbinding bid and are currently awaiting the next steps in the process. We intend to grow our mail activities organically in all European countries. Alliances are also possible ways to accelerate this growth, but the risk and controls in any deal must be secured in an attractive way.

China is at the top of my agenda. I made six working visits there in 2004, meeting with customers and government officials. In September, the entire Board of Management spent a week in Shanghai, where we opened our new China head office. The country is an economic powerhouse with enormous potential, but to realise its potential and remain competitive, it needs logistical skills to feed and sustain its incredible growth. We feel honoured to help meet these needs, both through our activities and through the TNT China University, which opened in November 2004. In the coming years we hope to help train thousands of students to begin meeting that country’s exploding need for skilled logistics professionals.

China is also the arena in which the TNT1 approach comes into its own. TNT China is taking the lead for the whole company, addressing the market with a unified TNT product offering in mail, express and logistics – and reaping the fruits of this approach. In 2004 we took an important first step in freight management with our acquisition of Sweden-based Wilson Logistics Group. I extend a hearty welcome to the 2,300 employees of Wilson, our new colleagues. I trust you will feel at home in our TNT family.

Our customers, particularly those in Asia, are increasingly demanding integrated logistics solutions, which include freight management. Wilson gives us global capabilities in this area, and we will continue looking to strengthen our freight management presence in the United States and in China.

Making our house a powerhouse for society

The TNT strategy goes beyond our goal to achieve industry leadership. We also aim to achieve social leadership. And just like the TNT house, this goal is built on the solid foundation of our three divisions and the strength of our global TNT brand. Next to those elements come two pillars: transparency & integrity and corporate sustainability.

When assembled together, all these elements fuel our good reputation and that, in turn, fuels our company pride. While it may seem like a rather intangible factor, I happen to believe that pride is perhaps the highest ideal a company can strive for. When we achieve the capacity to instil pride in our employees and inspire our customers and shareholders, then, I believe, we will contribute to a better world and gain social leadership.

Making our house sustainable

In the area of corporate sustainability 2004 marked a year of progress for us. We are publishing our first corporate sustainability report over 2004. You can find it on our website at tpg.com, and we will continue to report on our progress in certification. Our aim is to be as open and transparent as possible about our sustainability efforts.

Part of our sustainability effort is our partnership with the United Nations World Food Programme (WFP). We use our core competencies and business skills to support WFP in five areas: joint logistics supply chain, private sector fundraising, emergency response, transparency and accountability, and school feeding support. In addition to these projects, more than 40,000 people participated in our first global Walk the World fundraising event in 2004. And at the end of the year, we were able to help WFP in its work to help those affected by the disastrous tsunami in Asia.

Our work with the World Food Programme has benefited us as well, not least because it has made our employees more proud of our company. For us in the service industry, customer satisfaction depends on the dedication and quality of our people and their willingness to go the extra mile. Employee engagement is therefore a key performance indicator for us, and our surveys show that our partnership with WFP plays a vital role in strengthening this important measure.

Making our house transparent

In addition to the operational challenges in our divisions that I have already mentioned, our group as a whole faces challenges: 2005 will be the year we strive to become fully compliant with the Sarbanes-Oxley Act. This is a big undertaking that will affect our entire company, and we aim to get this right. In response to our review of tax issues in the group, we will continue to formalise, strengthen and adapt, our internal lines of communication and the functioning and monitoring of the tax, legal and financial reporting functions around the group.

Another important development will be the switch to the new International Financial Reporting Standards, which on 1 January 2005 became applicable to all listed companies in the European Union. We expect to inform all stakeholders about the changes in our financial statements as a result of the new IFRS in an official announcement on 27 April 2005. As always, we maintain our commitment to the transparency of our financial statements and risk factors, and we aim to continue improving their quality.

TNT House will bring new energy in 2005 As we work together to grasp all of the opportunities and meet all these and other challenges that lay ahead, I am certain we will be inspired with new energy to keep building and improving our TNT house. I thank all my TPG and TNT colleagues for the magnificent job they did in 2004. With your help and support, I am confident that 2005 will also be successful.

Peter Bakker, CEO

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