In accordance with our articles of association, the remuneration of the members of the Board of Management is the responsibility of the Supervisory Board. The remuneration of the individual members of the Board of Management (including equity-based compensation) has to be in compliance with the remuneration policy. The remuneration policy is adopted by the annual general meeting of shareholders. The remuneration committee is appointed by our Supervisory Board to assess and propose the remuneration policy for members of the Board of Management and the proposal for the remuneration for the individual members of the Board of Management.

The remuneration committee is made up of at least three members of the Supervisory Board and is chaired by the vice-chairman of the Supervisory Board. In 2004 the remuneration committee comprised J.M.T. Cochrane (chairman),

V. Halberstadt and R.W.H. Stomberg. None of the members of the remuneration committee is a member of the management board of another Dutch listed company and none of the members of the remuneration committee is member of the audit committee. During 2004, the remuneration committee met five times. The chief executive officer was invited for all meetings except the meeting where his own terms or conditions were discussed. The secretaryship of the committee is filled by our corporate human resources department.

The remuneration committee used professional advice from the following independent external advisors:

• Allen & Overy provided legal advice on employment related matters,
• Towers Perrin and Hewitt Associates advised on remuneration market practice and equity based compensation and provided the valuations used for the long-term incentives,
• Petercam Bank Nederland B.V. advised on our total shareholder return performance compared to our peer group, and
• Ernst & Young provided tax advice relating to the employment of the US –based members of the Board of Management.

This report sets out the policies on the remuneration of the members of the Board of Management and the members of the Supervisory Board. For the disclosure of the remuneration paid to individual members of the Board of Management, see note 17 of the consolidated financial statements.

REMUNERATION POLICY FOR THE SUPERVISORY BOARD

The remuneration of the members of the Supervisory Board is currently based on a base compensation and a variable compensation linked to attendance of the meetings of the committees of the Supervisory Board. The members of the Supervisory Board do not receive any performance-or equity-related compensation and do not accrue any pension rights with our company. The members of the Supervisory Board do not receive any severance payments in the event of termination.

The current remuneration scheme was introduced in 1998 when TPG was demerged from Royal PTT Nederland NV and the

Objective of remuneration

The objective of the remuneration policy is to attract, motivate and retain qualified members of the Board of Management of the highest calibre, with an international mindset and background essential to the successful leadership and effective management of a large global company and to reward them accordingly based on performance. The remuneration structure for the Board of Management is therefore designed to balance short-term operational performance with the longer term objectives of the company. Total remuneration is benchmarked against the relevant market.

Remuneration elements

The remuneration for members of our Board of Management comprises of the following elements: a base salary and other periodically paid compensation, a short-term incentive component, a share-matching scheme, a long-term incentive component and pension arrangements. Only the periodically paid compensation is fixed, all other components are linked to performance.

Total compensation is set at a medium level for total compensation relative to the European reference market for executive directors of multinational companies. The European market is defined as the composite market of the Netherlands, the United Kingdom, Germany, France, Belgium, Switzerland and Italy:

Country	Reference market
The Netherlands	AEX
United Kingdom	FTSE 100
Germany	DAX 30
France	CAC 40
Belgium	BEL 20
Switzerland	SMI 25
Italy	MIB 30

This reference market reflects companies with comparable revenue, number of employees and international character.

Base salary

The base salary for members of the Board of Management is set at a median level relative to the European reference market for executive directors of multinational companies as set out above. For the base salary of members of the Board of Management the remuneration level of the country of residence is benchmarked

an annual bonus for the achievement of predetermined targets. These targets are agreed and set by our Supervisory Board at the beginning of each financial year. The at-target bonus level is 60% of base salary with an additional 15% available for overachievement towards a stretched target.

The performance challenge for the Board of Management is to achieve sustainable performance on both the short term and the long term. Our mission is aimed at achieving this by continuously exceeding the expectations of our customers, leading the industry by instilling pride in our people, creating value for our shareholders and by sharing responsibility for our world.

Starting 2005, the short term incentive programme for the Board of Management reflects the accountability for our mission by rewarding both for the financial and non-financial performance required for sustainable results.

The financial targets for the chief executive officer and the chief financial officer are set in terms of earnings per share growth from continuing operations. This target was continued because it best reflects our commitment to create value for our shareholders. The targets for a divisional member of the Board of Management consist of targeted earnings per share growth from continuing operations of the company as a whole and of internal targeted economic profit of the relevant division. The divisional members of the Board of Management have these two targets to illustrate their responsibility towards our company as a whole as well as towards a profitability of their own division. Both targets are measured independently and the realisation of these targets can independently lead to bonus payments.

The non-financial targets are related to the elements of our mission that do not directly impact our financial performance in the short term but are crucial to the continued success of the company in the long term by engaging our people, exceeding the

The bonus based on earnings per share growth performance will be calculated using a sliding scale between the minimum performance and the stretch performance. Below the minimum required performance, the bonus for financial performance is zero.

The same sliding scale between minimum and stretch is also applicable for the determination of the part of the bonus for the divisional members of the Board of Management based on the divisional economic profit results.

The additional special incentive for the Group Managing Director Logistics is awarded when at least 150% of the cumulative target EBITA after three years is achieved. The award amounts to 90% of the base salary after three years for at target performance up to 180% of base salary for achieving stretch performance. The performance is determined at the end of the three year period as a cumulative performance versus the cumulative annual EBITA target.

SHARE-MATCHING SCHEME
Any bonus payable under the short-term incentive scheme described above will be paid 75% in cash and 25% in our shares at the then current market value with an accompanying right on matching shares. The number of bonus shares involved is calculated by dividing the 25% of the bonus by the share price on the day of grant. The day of grant is the day following the announcement of the first quarter results. If at least 50% of the shares are retained for a period of at least three years, the company will match the amount of shares earned under the short-term incentive scheme on a one-to-one basis. In compliance with the Corporate Governance Code, the members of the Board of Management will not sell their matching shares before the earlier of five years from the date of grant or the end of the employment. Any sale of shares for the purpose of using the proceeds for the tax relating to the grant of these shares is exempted from this practice.

Long-term incentives: share options and performance shares

The option grant for 2005 is replaced by an equivalent grant under the existing Performance share plan. This will increase the share ownership of the members of the Board of Management, whilst aligning their reward closely to the future development of the share price and the resulting value creation for our shareholders and strenghten the commitment of the Board of Management to the company and its objectives.

We consider options to be less effective in aligning the interest of the Board of Management to the interests of the shareholders than performance shares. Performance shares more accurately reflect the share price development that creates value for our shareholder.

The conversion of the option grant to a performance share grant will not affect the remuneration value of the Long term incentive compensation. A conversion factor is applied that ensures an equal accounting cost for the performance share grant in return for the option grant, based on the IFRS2 accounting rules which apply to both the option plan and the performance share plan starting 2005.

In 2005 we will grant in addition to the normal performance share grant, one additional performance share for every 2.5 options under the normal option grant policy.

Below we will continue to disclose both the share option and performance share plan since the option plan is still in effect for the option grants made until 2004. We will not convert any of the past grants under the option plan.

The long-term incentive for the members of the Board of Management comprises of two elements: the TPG share option

1. The vesting of 50% of the share options and performance shares will be determined by reference to the relative position of our total shareholder return after three years in the peer group consisting of other Euronext Amsterdam listed companies.
2. The vesting of the remaining 50% of the share options and performance shares will be determined by reference to the relative position of our total shareholder return after three years in the peer group of international direct competitors.

2. DIRECT COMPETITION PEER GROUP
   The remaining half of the previous share options and all performance shares will vest by reference to our relative position in the international direct competition peer group as calculated in accordance with the following ranking table. For this purpose, our peer group of direct competitors consists of UPS, FedEx, DPWN and Exel. For the grant in 2004 the Supervisory Board has decided to not replace Hays by a new peer group company after they had sold their logistics divisions. None of the existing companies in the logistics and/or express mail industry were

Shares granted to our Board of Management via our equity plans without financial consideration must be retained for a period of at least five years after grant or until at least the end of employment, if this period is shorter, unless it can be demonstrated to our corporate secretary that their sale is prompted by required tax payments with respect to these shares.

of Management aims at a retirement age between 60 and 65 with a benefit commensurate with benefits for members of the Board of Management of comparable companies in the country of residence. The pension arrangements for all Board members include entitlement to a pension in the event of ill health or disability and a spouse’s/ dependant’s pension on death. We have closely followed the discussions on pensions in the Netherlands and in Europe. We are aware of the development towards career average pensions and will review how this could impact the pensions for the existing members of the Board when these developments would require that.

Severance

In relation to contracts with new members of the Board of Management we aim to set the severance payments at one-year of base salary. Contracts entered into before 2004 will remain unaltered. For members of the Board of Management, who are not a resident of the Netherlands, we follow local market practice for the severance for a portion of the base salary. This portion of the salary is earned in the country of residence and the severance on that part would be applied based on local practices.

Loans

We do not grant personal loans to any of our Board of Management and Supervisory Board members. In connection with the grant of share options in 1999, loans were offered to the Board of Management to pay the Netherlands tax arising from the grant, which was levied at the time the grant was made. The current members of the Board of Management have repaid their loans to the company as reported in the annual report over 2003. The company decided not to request the former members of the Board of Management repayment of the loans that were associated with the tax paid on grant of the 1999 management options that expired in 2004. The severance payments in 2004 relate to the waiver of these loans to former members of the Board of Management (John Fellows, Carel Paauwe, Bert van Doorn).