0 15 NET SALES : 12 ,585 MILLION (2003: 11,785; 2002 :11,662)

The net sales of mail, express and logistics relate to the trading activities of all three divisions, arising from rendering services.

In note 28 “Segment Reporting”, the net sales allocated by geographical area in the country or region in which the entity records the sales are specified.

(€1 million; 2003: 9; 2002: 58) and the rent of buildings and houses and other revenues (€41 million; 2003: 39; 2002: 32).

0 17 SALARIES AND SOCIAL SECURITY CONTRIBUTIONS: €4,305 MILLION (2003: 4,163; 2002: 4,027)

The net periodic pension cost in 2004 in respect of the defined benefit pension plans amounted to €128 million (2003: 43; 2002: 6). Included in this amount was €87 million termination benefit costs and the pro rata part of the unrecognised settlement losses as described in note 9.

At the end of 2004, 8,979 people (2003: 7,363; 2002: 9,919) were employed by proportionately consolidated companies, of whom 4,964 (2003: 4,139; 2002: 5,854) were on the payroll of Dutch companies, primarily Postkantoren B.V., and 4,015 (2003: 3,224; 2002: 4,065) were on the payroll of companies outside the Netherlands.

Employees in our logistics division increased in 2004 by 1,889 (2003: 5,352) or 4.9%, compared to an increase of FTE’s of 2,251 (2003: 5,088) or 6.0%. This is mainly due to the acquisition of Wilson.

In 2004 the average number of full time equivalent in the mail division was 41,183. This was a decrease of 3,145 compared to

last year was mainly caused by restructuring plans and natural attrition in the Netherlands.

No options or shares were granted to members of the Supervisory Board and none of the members of the Supervisory Board accrued any pension rights with our company.

Remuneration of members of the Board of Management

During 2004, the Board of Management consisted of five members. The Board of Management remained unchanged during 2004.

TOTAL REMUNERATION

In 2004, the remuneration, including pension and social security contributions, of the current and the former members of the Board of Management amounted to €7,956,604 (in 2003: €13,923,698; 2002 €7,243,908. Included is €334,661 (in 2003: €8,925,560; 2002: €14,266) with respect of former members of the Board of Management.

The remuneration of the individual members of the Board of Management is set out in the table below:

BASE SALARY

Details of the base salary and the other periodic paid compensation elements of the current Board of Management are set out below:

For 2004 the Board of Management has not recveived an increase in base salary. In 2005 the Board of Management again will not receive an increase in base salary. The country of residence component in the base salary for Dave Kulik and Marie-Christine Lombard consisted of €500,000 for Dave Kulik and €400,000 for Marie-Christine Lombard.

SHORT-TERM INCENTIVE

Since 2002, we account for bonus payments on the basis of the accrued bonuses for the performance of the year reported. In 2004, an amount of €191,952 was paid to the members of the Board of Management for performance over 2003. In the table below the amount of €2,288,333 reflects the accrued bonuses for performance over 2004 and the amount of €142,746 reflects

The 2004 profit share and bonus amounts for the members of the Board of Management are accrued as set out below:

SHARE-MATCHING SCHEME

In 2004, of the amount of €191,952, paid in relation to company results, 75% (€143,964) was paid in cash and 25% (€47,988) was paid in shares. These bonus-shares are held in a trust by our share administrator.

All members of the Board of Management participated in the scheme for the bonus earned during their Board membership

LONG-TERM INCENTIVES

The maximum number of options and performance shares that can vest are disclosed in this report (150% of base allocation share options and 120% of base allocation performance shares).

LONG TERM INCENTIVE / PERFORMANCE SHARE SCHEME

Our relative total shareholder return over the period from 1 January 2002 through 31 December 2004 governs the share option grant and performance share grant for 2002. Our relative total shareholder return over the period from 1 January 2003 through 31 December 2005 governs the share option grant and performance share grant for 2003. If the granted share options and granted rights on performance shares were to vest on 31

If the granted share options were to vest on 31 December 2004, the following share options would have vested based on the total

The table below shows the actual vesting of the 2002 performance shares on 31 December 2004, since the performance period ended then and vesting was after three financial years.

VARIABLE COMPENSATION

In the table below the total variable compensation granted in 2004 to the members of the Board of Management is expressed as a percentage of base salary. For this purpose the value of the rights on matching shares, share options and rights on performance shares were calculated using the Black-Scholes

SEVERANCE

Termination arrangements for the members of the Board of Management are as follows:

Compensation is defined as the base compensation, the average bonus over the last three years and pension contribution. For members of the Board of Management who are not resident

PENSIONS

Peter Bakker, Jan Haars and Harry Koorstra are participants in a defined benefit scheme, which provides an annual benefit of 70% of pensionable salary, assuming 35 years of service. Dave Kulik participates in a defined benefit scheme with a normal retirement benefit accrual of 1.75% per year and a 401(k) scheme (defined contribution). Marie-Christine Lombard participates in a defined

The difference between the transfer values of the accrued benefits of our Dutch members of the Board of Management have been calculated on the basis of actuarial advice in accordance with the regulations from the Dutch Ministry of Social Affairs and Employment.

For Dave Kulik, the change in tranfer value is included in the total remuneration as a pension contribution for future payments. The pension contribution for Dave Kulik is to a non-funded pension scheme, meaning that the liability for a future pension exists, but the money is not actually transferred to a fund.

In addition, we contributed €12,267 for Dave Kulik and €150,000 for Marie-Christine Lombard under a defined contribution scheme.

Personnel and management option plans

PERSONNEL OPTION PLAN

Our Board of Management decided, with the approval of our Supervisory Board, to offer our employees working in the Netherlands under the collective labour agreement a one-time opportunity to participate in a personnel option plan on 4 January 1999. In total 23,716 employees accepted the plan.

The most important aspects of the plan were:

• The employee was granted an option right for 100 of our company shares.
• Options were granted at the opening price (€27.70) as traded on the Euronext Amsterdam on the date the grant is made.
• The option is exercisable between the third and fifth anniversary of the day of grant, after five years the outstanding options are forfeited.
• The option holder retains the right to exercise his/her option when he/she leaves the company for certain reasons (retirement, certain reorganisations, disability or death).
• The option holder loses the right to exercise his/her option when he or she leaves the company for reasons other than those mentioned above.

At the time of grant of the personnel options tax was levied on the grant of option rights in the Netherlands. Although our personnel options were granted in the most tax efficient way at the time, participation resulted in a net after tax cost to a large number of participants.

Given that the personnel options have never been in the money since they became exercisable on 4 January 2002, we decided to compensate the remaining participants in the personnel option plan for their loss when their options expired on 4 January 2004.

MANAGEMENT OPTION PLAN

Senior managers, excluding members of the Board of Management and former members of the Board of Management, were granted company stock options in 2004 (€3,390,304), 2003 (€3,214,500), and in 2002 (€2,499,750). These grants are part of the policy of granting options each year to eligible members of senior management up to and including 2004.

The exercise of options is subject to the TPG rules governing inside information.

The table below summarises the status of the number of outstanding options granted to personnel and management:

STATEMENTS OF CHANGES OF OUTSTANDING OPTIONS

The table above also includes the outstanding options of the members of the Board of Management and former members of the Board of Management. All options granted entitle the holder to the allotment of ordinary shares when they are exercised.

BONUS / MATCHING PLAN FOR SENIOR MANAGEMENT

Members of a select group of senior managers were paid 75% of their 2002 and 2003 bonus in cash and 25% as a grant of TPG shares with an associated matching right in 2004 (107,710)

The most important aspects of the plan are: 50% of the bonus shares are sold within 3 years, the entire right to matching shares lapses with immediate effect.

• The grant of the right on bonus shares is in lieu of 25% of an individual’s annual bonus payment, and bonus shares are delivered shortly after the right is granted.
• The number of bonus shares is calculated by dividing 25% of an individual’s gross annual bonus relating to the preceding financial year by the weighted average share price on the Euronext Amsterdam on the date the grant is made (2004: €18.44/share).
• The rights on matching shares are granted for zero costs and the number of shares is equal to the number of bonus shares.
• The matching shares are delivered three years after the delivery of the bonus shares. One matching share is delivered for each bonus share that has been retained for three years.

The number of matching rights on shares granted have been accrued as part of the salary costs of 2004 on a linear pro rata basis.

Hedging of Shares

We manage our risk in connection with the obligations we have under the existing share and option plans by purchasing shares in the market. In 2004 and 2003 we purchased no shares for hedging purposes.

On 29 September 2004 we announced that the Dutch State sold a total of 77.7 million ordinary shares in our outstanding share capital, representing approximately 16% in our company. With the sale and transfer the State has reduced its ownership in our capital from 34.8% to 18.6%. We repurchased 20.7 million of the total amount of shares sold by the State. Transfer of the repurchased ordinary shares has taken place in two tranches. The first tranche of 7.6 million shares was transferred to us on

As all options were granted at an exercise price that equals the average price on the Amsterdam Stock Exchange on the day of grant, no charges would have been recorded in the 2002, 2003 and/or 2004 income statements. If the company had elected

These pro forma results are not an indicator of future performance. Prior to 1 January 2002, we calculated the fair value of options granted to senior managers and Board members using the binomial method, American-style with dividend. From 1 January 2002, we calculated the fair value of these options using the Black Scholes model. The use of the Black Scholes model, rather than the binomial pricing model, did not have a material effect on the compensation expense or on the pro forma net income or per share amounts disclosed.

0 18 DEPRECIATION, AMORTISATION AND IMPAIRMENTS : 533 MILLION (2003: 711; 2002 : 490)

Depreciation and impairments of property, plant and equipment are detailed as follows:

In 2004, the allocation of the amount of depreciation and impairments to the divisions mail, express and logistics was respectively €162 million, €209 million and €158 million, (2003: 176, 198 and 335; 2002: 137, 191 and 159). In addition, depreciation in respect of non-allocated business amounted to €4 million (2003: 2; 2002: 3).

0 19 OTHER OPERATING EXPENSES : 761 MILLION (2003: 759; 2002 : 843)

Total advertising expenses incurred in the year amounted to €45 million (2003: 56; 2002: 72), respectively in mail €21 million, express €21 million and logistics €3 million.

The other operating expenses in mail in 2004 were €261 million (2003: 265; 2002: 315), in express €236 million (2003: 215; 2002: 223) and in logistics €239 million (2003: 253; 2002: 269).

Fees for audit services include the audit of TPG’s annual financial statements, the review of interim financial statements, statutory audits, services associated with issuing an audit opinion on the postal concession reporting and services that only the external auditor can reasonably provide. Fees for audit related services include employee benefit plan audits, due diligence related to mergers and acquisitions, internal control reviews, consultation on Sarbanes-Oxley requirements, IFRS training and consultation

0 20 INTEREST AND SIMILAR INCOME AND EXPENSES

INTEREST AND SIMILAR INCOME : 37 MILLION (2003: 18 ; 2002 : 20)

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

INTEREST AND SIMILAR EXPENSES : 114 MILLION (2003: 110 ; 2002 : 128)

Interest and similar expenses increased by €4 million (3.6%) compared to 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 expenses was adversely affected by interest rate movements (€3 million), particularly as UK rates

0 21 INCOME TAXES : 428 MILLION (2003: 368 ; 2002 : 341)

Income taxes in the statements of income of 2004 amount to €428 million (2003: 368; 2002: 341), or 39.0% (2003: 54.5%; 2002: 35.9%) of income before income taxes, €105 million of our total income taxes relates to tax authorities outside the Netherlands (2003: 104; 2002: 88).

Income taxes differ from the amount calculated by multiplying the Dutch statutory corporate income tax rate with the income before income taxes. In 2004, the effective income tax rate was 39.0% (2003: 54.5%; 2002: 35.9%), which is higher than the statutory corporate income tax rate of 34.5% in the Netherlands (2003: 34.5%; 2002: 34.5%). The decline on the effective tax rate is predominantly the result of the impact of the non-tax deductible goodwill impairments in the third quarter of 2003

In the year 2004, the current tax expense amounted to €347 million (2003: 188; 2002: 357). The difference between the total income taxes in the statements of income and the current tax expense is due to timing differences. These differences are recognised as deferred tax assets or deferred tax liabilities.

Deferred tax assets and liabilities with the same term and the same consolidated tax group are presented net in the balance sheet if we have a legally enforceable right to offset the recognised amounts.

At 31 December 2004, deferred tax assets amounting to €395 million (2003: 205) have been accounted for as financial fixed assets and €40 million (2003: 37) within accounts receivable. Included in financial fixed assets is an amount of €200 million relating to the referred tax on the minimum pension liability (see note 9).

The total accumulated losses that are available for carry forward at 31 December 2004 amounted to €793 million (2003: 750).

The expiration of total accumulated losses is presented in the table below:

	2004
2005	8
2006	7
2007	10
2008	22
2009 and thereafter	147
Indefinite	599
Total	793
(in € millions)