TPG N.V. is a company with limited liability and was incorporated under the laws of the Netherlands on 29 December 1997. We changed our name from TNT Post Group N.V. in August 2001. Our registered address is Neptunusstraat 41-63, 2132 JA Hoofddorp, the Netherlands. Our telephone number is +31 20 500 6000.We were formed in connection with the consummation of a demerger transaction pursuant to which our former parent company, Koninklijke PTT Nederland NV (KPN), demerged its mail, express and logistics divisions. Although the demerger became effective on 28 June 1998, its arrangements were effectively retroactive to 1 January 1998.

Our group is composed of three segments: our mail division, our express division and our logistics division. TPG N.V. is a holding company and sets the agenda for the group and these three divisions. We provide a wide range of mail, express and logistics services worldwide. These services involve the collection, storage, sorting, transport and distribution of a wide variety of items for our customers within specific time-frames, and related data and documentation management services.

Although TPG N.V. has existed as an independent company only since 1998, our history in the mail, express and logistics businesses goes back over a much longer period of time. The roots of our mail division stretch back more than 200 years and are firmly embedded within the operations of Royal TPG Post B.V. Our express business has been meeting the need for time-sensitive door-to-door delivery services for half a century, and the logistics division was a pioneer in the emerging logistics market during the mid 1980s.

We have evolved from being the public postal company in the Netherlands into an international group providing mail, express and logistics services. As a result, we have broadened the range of our activities from mainly postal operations in the Netherlands to include world-wide express and logistics services. Our express and logistics divisions are not subject to regulations (such as price cap mechanisms) imposed on the mail division by the Dutch Postal Act and the postal regulations of other national jurisdictions. Other than for reserved postal services, which our mail division has the exclusive right to provide under the Dutch Postal Act, our mail division, as well as, our express and logistics divisions are subject to competition.

The State of the Netherlands is our largest shareholder. The State holds a special share that gives it the right to approve certain fundamental decisions with respect to us. The State also owns approximately 18.6% of our outstanding ordinary shares as of the date of this annual report. The State has indicated its intention to further reduce its shareholding to approximately 10% of our ordinary shares. See chapter 12, note 26.

MISSION & STRATEGY

Our mission is to deliver value to our customers by providing the most reliable and efficient solutions in distribution and logistics.

only a tenth of Europes top-tier markets, we estimate that the opportunities in the Chinese direct mail market are significant. We have taken concerted actions to move our business in China forward. We have started to establish an integrated management team with the goal of setting up a single mail, express and logistics company in China. We have incorporated a wholly owned international holding company, TNT (China) Holding co. Ltd., to give us better access to the market. Through this integrated company, we aim to realise cost efficiencies and align our strategies for China across divisions.

We have expanded our express network in China of TNTowned branches from 12 to 25 in the first half of this year. Our automotive logistics joint venture, Anji-TNT, renewed its automotive logistics contract with Shanghai Volkswagen for inbound, finished vehicle distribution and aftermarket services. We believe that we are the only third party logistics company in China to cover the complete automotive supply chain as a result of the renewal of this contract with Shanghai Volkswagen. In terms of local partnerships, we have expanded our cooperation with China Post to the mail business where our mail team has been working as their network efficiency consultants.

For our business to continue expanding in China, we recognise the critical importance of building local talent. Working in partnership with the prestigious Shanghai Jiaotong University, we opened the TNT China University in November 2004 with the goal of training and imparting professional and business skills to our employees.

BUILD ON THE LE ADERSHIP POSITION OF TPG POST IN THE POSTAL INDUSTRY
We have continued to pursue a leading position in the European mail market. We strive to be the leading pan-European postal company as national markets open up for competition. As a result of further liberalisation we also explore value-creating opportunities when stakes in postal operators that are currently in the hands of national governments are divested. Our current involvement in the sale process of a 25% stake in Denmark Post since December 2004, is an example of this.

EXPAND BUSINESS PORTFOLIO TO INCLUDE FREIGHT MANAGEMENT
We have reiterated our stated ambition in growing into freight management which, in 2004, resulted in the acquisition of the Swedish freight management company Wilson Logistics Holding AB. See page 42. The need for freight management capabilities is driven by customer demand and the desire to achieve a better balance in our portfolio of businesses.

REBRANDING
To highlight the increasing internationalisation of our company, we have decided to submit a proposal to the annual general meeting that is expected to take place on 7 April 2005 to change the statutory name of our company to TNT N.V., see chapter 14. After the name change, we will operate globally under the brand TNT for all our activities from 2006. Operating under one brand will increase the recognition of our group worldwide and allow for more efficient communication on the services we provide. It will also symbolise the cohesion between the three divisions within our company: mail, express and logistics.

OUR COMMITMENT TO COMMUNITY

Since 2003, we have been actively involved in the World Economic Forums logistics and transport sector corporate citizenship initiative.

Corporate Philanthropy

In June, thousands of TNT and WFP personnel, with their friends and families, participated in Walk the World, a sponsored walk encompassing over 70 countries.

In 2004, we had total operating revenues of 12,635 million. Our mail division accounted for 30.9% our operating revenues, 71.0% of our operating income and 62.2% of our earnings from operations (operating income excluding goodwill amortisation and impairment and non-allocated operating income/expense see Earnings from operations on this page). Our express division accounted for 37.2% of our operating revenues, 27.4% of our operating income and 26.8% of our earnings from operations. Our logistics division accounted for 32.3% of our operating revenues, 7.7% of our operating income and 11.0% of our earnings from operations.

The information in the chapters Information on the company, The mail division, The express division, The logistics division and Other financial information on the company should be read together with our consolidated financial statements.

Key factors that affect our results of operations include:

• the volumes of mail we deliver,
• the number of shipments transported through our networks,
• the mix of services we provide to our customers,
• the prices we obtain for our services; the average number of working days in a year,
• our ability to manage our capital expenditures and operating expenses, and
• our ability to match our operating expenses to shifting volume levels.

Our mail and express divisions provide services to customers and account for revenue for those services on a daily basis; results of operations are therefore influenced by the average number of working days in a year.

We use total operating revenues, i.e. net sales plus other operating revenues, to assess the performance of our divisions. We believe that other operating revenues are a recurring element and allocate them to divisions when we review their performance. See note 16 to our consolidated financial statements for a description of other operating revenues.

We attribute revenues and expenses to our divisions based on the underlying nature of the transaction that gave rise to the revenue or expense and the division involved. We call revenues and expenses that we do not allocate to divisions nonallocated. These revenues or expenses occur at the group level or we do not consider them part of the divisions operations. This method of allocating revenues and expenses is consistent with how we internally manage our businesses.

The results for 2002 of our express and logistics divisions have been retroactively adjusted for consistency to reflect the transfer of our Innight business from express to logistics in January 2003. Operating revenues of our mail lines of business have been retroactively adjusted to reflect a more accurate elimination of intra-division transactions.

EARNINGS FROM OPERATIONS

Total operating revenues increased by 6.5% in 2004 compared to 2003. Operating income increased by 53.1%, mainly due to:

• productivity improvements and cost control in our mail division,
• growth in our express division,
• a successful recovery of the profitability of our logistics division,
• the 2003 goodwill impairment of 183 million in our logistics and mail divisions,
• asset impairments of 10 million in 2003, and
• 67 million of costs associated with the Transformation through Standardisation programme in our logistics division in 2003.

The mail divisions operating revenues declined by 0.4% in 2004 mainly due to a decrease in addressed Mail Netherlands volumes (-1.5%). On a comparable number of working days basis, this volume decline amounted to -3.2%. These volumes continued to decline as a result of growing competition, substitution and customers suspending their mailings. Our mail division focused on quality and margin to defend its market position. The mail divisions operating income increased by 8.7%, primarily due to cost control in Mail Netherlands, a favourable net result of 25 million after the unwinding of our contract with an insurance company for future wage guarantees and various social measures, which are discussed in detail in chapter 3 The mail division, and a goodwill impairment of 20 million in 2003. Earnings from operations increased by 5.5%.

Our express division achieved 10.5% higher operating revenues compared to 2003 due to a strong performance in their international businesses and an increased number of working days, despite mixed economic conditions especially in their key national markets. Through offering the right products, competitive pricing and having an efficient sales process our express division was able to show this performance. Express operating income increased by 44.4%, primarily due to continued focus on the divisions standard commercial policies and achieving further operating efficiencies. These further operating efficiencies were achieved by continuing to share best operating practices throughout their business and investing in operations and information systems aimed at further improving the service quality. Earnings from operations increased by 35.1%.

During 2004 our logistics division delivered a 346 million (9.3%) increase in operating revenues compared to 2003, of which 258 million arose as a result of the inclusion of the results of newly-acquired businesses (net of disposals), primarily the Wilson freight management business. The logistics division generated operating income of 90 million. This represents a 293 million improvement over the prior year. After adjusting the 2003 comparative figures to reflect the additional charges in 2003 of 163 million of costs for goodwill impairments, 10 million of costs for asset impairments and 69 million of various costs associated with the Transformation through Standardisation programme, logistics operating income improved by 51 million in 2004, with earnings from operations increasing 50 million, including a net acquisition impact of 10 million.

2004
Total operating expenses increased by 362 million (3.3%) to 11,461 million compared to 2003. Overall, the organic growth in operating expenses was 1.6%, the increase due to acquisitions effective in 2003 (including DocVision B.V., Blitzpunkt GmbH, Werbeagentur Fischer GmbH, Full Service Srl. and Archive and Data Storage Ltd.) and in 2004 (including Wilson, Koc Group Turkey (remaining shares), Overtrans Srl. (remaining shares), Hfinger Haushaltswerbung GmbH (remaining shares), Prime Vision B.V., Seducom B.V. and our joint venture with Essent N.V., Cendris BSC Customer Contact) was 2.2%, and changes in foreign exchange rates had a positive effect of 0.6%. Our gross margin, defined as the total operating income as a percentage of operating revenues, increased from 6.5% in 2003 to 9.3% in 2004. The 2003 percentage was suppressed by the goodwill impairments and asset impairments in 2003.

Total cost of materials increased by 54 million (9.9%) compared to 2003. Organically, cost of materials increased by 68 million (12.5%), mainly due to higher fuel costs incurred in our express division (í·€í°€23 million) and higher costs in our logistics division (42 million). The organic cost increase was partly offset by the effect of disposals in 2004 (primarily DFDS Transport Logistics joint venture and Denis Bodden N.V./SA) by 13 million (-2.4%).

Work contracted out and other external expenses related to fees paid for sub-contractors, consultants, rent and leases. Total work contracted out and other external expenses increased by 342 million (7.0%) for 2004 compared to 2003. Acquisitions and disposals in 2003 and 2004 contributed 213 million (4.3%) to the increase. 169 million of the increase (3.5%) was primarily revenue related and reflected organic growth, especially in our express division. Changes in foreign exchange rates offset these cost increases by 40 million (-0.8%).

Salaries and social security contributions increased by 142 million (3.4%) compared to 2003. Acquisitions and disposals in 2003 and 2004 contributed 15 million (0.4%) to the increase. Excluding the favourable net result of 25 million, regarding the settlement for future wage guarantees and various social measures (as described in chapter 3 The mail division), salary costs increased organically by 164 million (3.9%), and reflected the 0.8% increase in our average number of full-time employee

from the focus on cost control in our mail division. Changes in foreign exchange rates further decreased these costs by 16 million (-2.9%).

Total work contracted out and other external expenses increased by 110 million (2.3%) for 2003 compared to 2002. Acquisitions in 2002 and 2003 contributed 38 million (0.8%) to the increase. 287 million of the increase (6%) was primarily revenue related and reflected organic growth, especially in our express and logistics divisions. Changes in foreign exchange rates offset these cost increases by 215 million (-4.5%).

Salaries and social security contributions increased by 136 million (3.4%) compared to 2002. Acquisitions in 2002 and 2003 contributed 23 million (0.6%) to the increase. An increase of 258 million (6.4%) was primarily revenue related and reflected the 6.9% organic increase in our average number of full-time employee equivalents and wage increases for employees, furthermore 37 million higher pension costs attributed to the increase. In our mail division, we experienced trend of replacing more expensive labour with less expensive labour in order to reduce operating costs. Changes in foreign exchange rates offset these cost increases by 145 million (-3.6%).

Depreciation, amortisation and impairments increased by 221 million (45.1%) compared to 2002. This increase was primarily due to the 183 million of goodwill impairments and 10 million of asset impairments made in the third quarter of 2003. The goodwill impairments were made in respect of our France (76 million), Italy non-automotive (48 million), Germany (24

2004
Total operating income for the group was 1,174 million, an increase of 53.1%. The operating income of all three divisions grew in comparison to the previous year. The mail operating income amounted to 833 million and is further described in chapter 3 The mail division. Express contributed 322 million to the group operating income and is further described in chapter 4 The express division. Logistics turned its 2003 negative contribution to the group operating income into a positive 90 million contribution. The logistics operating income is further described in chapter 5 The logistics division.

project for lean warehousing. Costs made to support the World Food Programme (see also chapter 9 - Code of Business Principles & corporate social responsibility) were 9 million, including our contribution to relieve the victims of the tsunami disaster in Asia. The other costs were 24 million, which is an increase of 15 million or 6 million if corrected for the 9 million release of an insurance provision in 2003. This increase was mainly due to strengthening the group head office functions as a result of remedial actions, and higher costs for advisors following our audit committee investigations.

Acquisitions effective in 2003 and 2004 had a positive 8 million effect on our operating income. Foreign currency movements during the year had a 2 million negative impact on our operating income.

2004
Net financial expense was 77 million in 2004, an improvement of 15 million (16.3%) compared to 92 million in 2003.

Interest and similar income in 2004 increased by 19 million (105.6%) compared to 2003, primarily due to a favourable 11 million result on realisation of mark-to-market positions following the unwinding of interest rate hedges and higher average cash balances.

Interest and similar expenses in 2004 were 4 million (3.6%) higher than in 2003. Interest and similar expenses were favourably impacted through a reduction in average gross debt which was offset by one-off interest charges incurred on taxes (6 million). The interest and similar expense was adversely affected by interest rate movements (3 million), particularly as UK interest rates increased, and higher expenses as a result of foreign exchange losses (3 million). The interest charge benefited from the strengthening euro exchange rate in relation to the US dollar (2 million).

2004
Group income taxes amounted to 428 million, an increase of 16.3% compared to 2003. Our effective tax rate for 2004 was 39.0% compared to 54.5% for 2003. This decline in effective tax rate was predominantly the result of the impact of the non-tax deductible goodwill impairments n the third quarter of 2003 (9.9%) and the effect in 2003 of the 59 million charge taken in connection with liabilities to the UK Inland Revenue, as described below.

The total accumulated losses that were available for carry forward at 31 December 2004 amounted to 쀀793 million. With these losses carried forward, future tax benefits of 260 million could be recognised. Tax deductible losses give rise to deferred tax assets at the statutory rate in the relevant country. Deferred tax assets are recognised if it is more likely than not that they can be offset against taxes payable in future years. As a result we recorded deferred tax assets of 98 million at the end of 2004. We established valuation allowances and have therefore effectively not recognised 162 million of the potential future tax benefits. This is mainly due to the uncertainty regarding the realisation of such benefits, for example as a result of the expiry of tax losses carried forward and legislative changes.

2003
Group income taxes amounted to 368 million, an increase of 7.9% compared to 2002. Our effective tax rate for 2003 was 54.5% compared to 35.9% for 2002, primarily due to the impact of non-tax-deductible goodwill impairments made in the third quarter of 2003 for our mail and logistics divisions and the effect of a 59 million charge taken in connection with liabilities to the UK Inland Revenue, following investigations conducted by our audit committee. The investigations conducted by our audit committee related to representations made to the UK Inland Revenue and to our auditors PricewaterhouseCoopers, with respect to certain UK tax matters originally arising in the late 1990s relating to one of our UK subsidiaries. In addition to this investigation, our audit committee, with the assistance of independent tax advisors, conducted a review of other UK tax matters that arose from the same period. This was partly offset by a favourable European ruling on the tax deductibility of interest expense in respect of our foreign subsidiaries.

The total accumulated losses that were available for carry forward at 31 December 2003 amounted to 750 million. With these losses carried forward, future tax benefits of 248 million could be recognised. Tax deductible losses give rise to deferred tax assets at the statutory rate in the relevant country. Deferred tax assets are recognised if it is more likely than not that they