12.13
Notes to the corporate balance sheets and statements of income
Notes to the corporate balance sheets and statements of income
ACCOUNTING POLICIES FOR VALUATION AND DETERMINATION OF RESULT TPG N.V.
The principles of valuation and determination of result for corporate financial statements and the consolidated financial statements are the same.Consolidated companies are carried at net asset value. For the principles of valuation of assets and liabilities and for the determination of result reference is made to the notes to the consolidated balance sheet and statements of income.
0 30 FIXED ASSETS : €3,647 (2003: 3,437)
| Investments in group companies |
Investments in affiliated companies |
Other loans receivable |
Prepayments & accrued income |
Total | |
| Balance at 31 December 2002 | 3,166 | 35 | 7 | 10 | 3,218 |
|---|---|---|---|---|---|
| Changes in 2003: | |||||
| Results | 329 | (3) | 326 | ||
| Acquisitions/additions | 13 | 13 | |||
| Disposals/decreases | (20) | (3) | (23) | ||
| Withdrawals/repayments | (7) | (7) | |||
| Exchange rate differences | (68) | (68) | |||
| Other changes | (22) | (22) | |||
| Total changes | 239 | (10) | (7) | (3) | 219 |
| Balance at 31 December 2003 | 3,405 | 25 | 7 | 3,437 | |
| Changes in 2004: | |||||
| Results | 694 | (2) | 692 | ||
| Acquisitions/additions | 10 | 10 | |||
| Disposals/decreases | (4) | (4) | |||
| Withdrawals/repayments | |||||
| Exchange rate differences | (32) | (32) | |||
| Minimum pension liabilities | (454) | (454) | |||
| Other changes | (1) | (1) | (2) | ||
| Total changes | 207 | 7 | (4) | 210 | |
| Balance at 31 December 2004 | 3,612 | 32 | 3 | 3,647 | |
| (in €millions) (in € millions) | |||||
0 31 SHAREHOLDERS’ EQUITY : €2 ,765 MILLION (2003: 2 ,969)
| Issued shared capital | Additional paid-in capital | Cumulative translation reserve | Other reserves | Unappropriated net income | Capital and reserves | Minimum liability | Total | |
| Balance at 31 December 2001 | 230 | 1,421 | (8) | 439 | 518 | 2,600 | 2,600 | |
|---|---|---|---|---|---|---|---|---|
| Net income | 599 | 599 | 599 | |||||
| Foreign exchange effects | (54) | (54) | (54) | |||||
| Other | 1 | 1 | 1 | |||||
| Total recognised income / expense for the period | (54) | 1 | 599 | 546 | 546 | |||
| Final dividend previous year | (114) | (114) | (114) | |||||
| Appropriation of net income | 404 | (404) | ||||||
| Interim dividend current year | (71) | (71) | (71) | |||||
| Total direct changes in equity | 404 | (589) | (185) | (185) | ||||
| Balance at 31 December 2002 | 230 | 1,421 | (62) | 844 | 528 | 2,961 | 2,961 | |
| Net income | 300 | 300 | 300 | |||||
| Foreign exchange effects | (68) | (68) | (68) | |||||
| Other | (20) | (20) | (20) | |||||
| Total recognised income / expense for the period | (68) | (20) | 300 | 212 | 212 | |||
| Final dividend previous year | (119) | (119) | (119) | |||||
| Appropriation of net income | 409 | (409) | ||||||
| Interim dividend current year | (85) | (85) | (85) | |||||
| Total direct changes in equity | 409 | (613) | (204) | (204) | ||||
| Balance at 31 December 2003 | 230 | 1,421 | (130) | 1,233 | 215 | 2,969 | 2,969 | |
| Net income | 667 | 667 | 667 | |||||
| Foreign exchange effects | (38) | 9 | (29) | (29) | ||||
| Other | (3) | (3) | (3) | |||||
| Total recognised income / expense for the period | (38) | 6 | 667 | 635 | 635 | |||
| Final dividend previous year | (142) | (142) | (142) | |||||
| Appropriation of net income | 73 | (73) | ||||||
| Interim dividend current year | (95) | (95) | (95) | |||||
| Repurchase of shares | (151) | (151) | (151) | |||||
| Minimum pension liabilities | (454) | (454) | ||||||
| Other | 3 | 3 | 3 | |||||
| Total direct changes in equity | (75) | (310) | (385) | (454) | (839) | |||
| Balance at 31 December 2004 | 230 | 1,421 | (168) | 1,164 | 572 | 3,219 | (454) | 2,765 |
|
||||||||
0 32 ISSUED SHARE CAPITAL: €230 MILLION (2003: 230)
Issued share capital amounted to €230 million at 31 December 2004 (2003: 230). The number of authorised, issued and
outstanding shares by class of share at 31 December 2004, 31 December 2003 and 31 December 2002 is as follows:
| Ordinary | Preference B | Special share | |
| Authorised | 1,200,000,000 | 1,199,999,999 | 1 |
|---|---|---|---|
| Issued and outstanding | 480,259,522 | 0 | 1 |
| of which held by the company to cover shareplans | 4,979,942 | 0 | 0 |
| of which held by the company for annulation | 7,600,000 | 0 | 0 |
We have ordinary shares in bearer form or in registered form. Ordinary shares in bearer form are represented by a global note held by the Dutch clearing system Euroclear Netherlands (formerly known as NECIGEF) and are transferable through Euroclear Netherlands’ book entry system. Ordinary shares in registered form are transferred by means of a deed of transfer and the company’s written acknowledgement of the transfer. We do not have share certificates for ordinary shares represented by the global note. ADSs represent ordinary shares in bearer form represented by the note held by Euroclear Netherlands. The special share and the B preference shares are registered. We purchased ordinary shares as part of our management and personnel share option plan (none in 2003 and 2002) and we therefore owned 4,979,942 ordinary shares at 31 December 2004. The State of the Netherlands is the holder of the special share. At 31 December 2004, the State holds approximately 21.3% of the ordinary shares. We may not vote on shares in our own capital. The TPG Protection Foundation was formed to care for our interests, the enterprises connected with us and all interested parties, such as shareholders and employees, by, among other things, preventing as much as possible influences which would threaten our 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. Agreements have been concluded between us and the Foundation for the placement or acquisition of preference shares B.
0 33 ADDITIONAL PAID IN CAPITAL: €1,421 (2003: 1,421)
Additional paid-in capital is exempt for Dutch tax purposes.
0 34 CUMULATIVE TRANSLATION RESERVE: €-168 (2003: -130)
Currency translation gains and losses on foreign subsidiaries of TPG N.V. are charged or credited to the cumulative translation reserve, net of taxation.
0 35 OTHER RESERVES: €1,164 (2003:1,233)
Foreign exchange results on hedges amounted to €9 million in 2004. The tax effect on these hedges amounted to €3 million and is presented under “other” within total income / expense recognised in the period.
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. By 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 4 October 2004 as shown in the table below. The first tranche was repurchased against €151 million (including transaction costs) and is deducted from other reserves.
| Number of shares purchased as part of the publicly announced repurchase plan | Price paid per share | Total number of shares purchased in 2004 | Remaining number of shares to purchase as part of the publicly announced repurchase plan | |
| 4 October, 2004 | 7,600,000 | €19.74 | 7,600,000.0 | 13,100,000 |
|---|
The other movement of €3 million includes the share grants of 2004 and exercise rights of options plans of prior years.
0 36 UNAPPROPRIATED NET INCOME: €572 (2003: 215)
The profit for 2004 has been calculated as the net income for 2004 of TPG N.V. and all its subsidiaries. The 2004 unappropriated component is €572 million (2003: 215), containing the net income of €667 million (2003: 300) and the paid interim dividend 2004 of €95 million (2003: 85). Subject to the approval of the general meeting of shareholders, the Board of Management proposes to add €404 million ( 2003: 73) to other reserves and to pay €168 million (2003:142) as final dividend.
0 37 MINIMUM PENSION LIABILITIES: €-454 MILLION (2003:0)
Full application of SFAS 87 requires us to recognise an additional minimum liability representing a net loss that under SFAS 87 is not yet to be recognised as net periodic pension cost, but to be reported as a separate component (that is a reduction) of equity (see note 9). We have deducted an amount of €454 million from our equity (net of tax).
0 38 AGES AND SALARIES
(No corresponding financial statement number)
TPG N.V. does not have any employees. Hence no salary, social security and pension costs were incurred.
0 39 COMMITMENTS NOT INCLUDED IN THE BALANCE SHEET
(No corresponding financial statement number)
REPURCHASE OF SHARES JANUARY 2005 TRANCHE
As announced by us on 29 September 2004, we decided to repurchase 20,7 million ordinary shares from the State. This transaction has been divided into two tranches of which the first one took place on 4 October 2004. The transfer to the legal ownership for the second tranche of 13,1 million shares was set on 5 January 2005. On 5 January, the second tranche was repurchased against €259 million.
DECLARATION OF JOINT AND SEVERAL LIABILITY
TPG N.V. has issued a declaration of joint and several liability for some of its group companies in compliance with article 403, Part 9, Book 2 of the Netherlands Civil Code. Those group companies are:- Royal TPG Post B.V.
- TNT Holdings B.V.
- TNT Logistics Holdings B.V
- TNT Express Holdings B.V.
- TPG Headoffice B.V.
FISCAL UNITY IN THE NETHERLANDS
The company forms a fiscal entity with the several Dutch entities for corporation tax purposes. The full list of Dutch entities which are part of the fiscal unity is included in the list containing the information referred to in article 379 and article 414, part 9, book 2 of the Dutch civil code, which is filed at the office of the Chamber of Commerce in Amsterdam. In accordance with the standard conditions the company and the subsidiary that is part of the fiscal entity are severally liable for taxation payable by the entity.
GUARANTEES
Parental support in the form of a guarantee or a letter of support has been provided by TPG N.V. to its subsidiary TPG FinanceB.V. for a syndicated loan (€600 million), various loan facilities including a €1,000 million commercial paper programme and various international swaps and derivatives association (isda) agreements. In addition, TPG N.V. has issued a guarantee for the syndicated loan entered into by its indirect subsidiary TNT Canada Inc. (€186 million).
Parental support in the form of a letter of guarantee has been provided TPG N.V. to its indirect subsidiary TNT Holdings (UK) Ltd. and its subsidiaries in relation to the acquisition of TNT Ltd. in 1996 and the subsequent restructuring of the group in 1997.
0 40 SUBSIDIARIES AND AFFILIATED COMPANIES AT 31 DECEMBER 2004
(No corresponding financial statement number)The full list containing the information referred to in Article 379 and Article 414, Part 9, Book 2 of the Dutch civil code is filed at the office of the Chamber of Commerce in Amsterdam.
0 41 MAIL REGULATION AND CONCESSIONS
(No corresponding financial statement number)Because of the importance of postal services to society, regulation is a significant factor in our mail business. The mandatory undertaking of certain postal activities in the Netherlands, some of which are exclusive, have been assigned to us in the Dutch Postal Act.
In the Netherlands the key legislation regulating our mail activities is the Postal Act. The Postal Act requires TPG to perform the mandatory postal services in the Netherlands, and it confers to us exclusive rights for some of these services, the reserved postal services.
The postal concession
MANDATORY POSTAL SERVICES
The domestic mandatory postal services mainly consist of the conveyance against payment of standard single rates of the following postal items:- items of correspondence (including reply items) and printed matter with a maximum weight of two kilogrammes
- postal parcels with a maximum individual weight of 10 kilogrammes, and
- registered, registered insured and registered value declared items.
In addition, bulk mail of items of correspondence up to an individual weight of 100 grammes, which are conveyed against separately agreed rates, are part of the mandatory postal services. Mandatory postal services also cover post office boxes.
For international inbound and outbound mail, in accordance with the rules of the UPU, mandatory postal services comprise conveyance against payment of both postal items at standard single rates and of bulk mail items at separately agreed rates with a maximum individual weight of two kilogrammes and of postal parcels with a maximum individual weight of 20 kilogrammes. We are not required to provide the delivery of bulk printed matter such as advertising, magazines and newspapers, the delivery of bulk letters of correspondence with an individual weight above 100 grammes and unaddressed mail items. In addition, mandatory postal services cover the postal services regulated by the UPU.
RESERVED POSTAL SERVICES
Under the Postal Act and the Postal Decree, the reserved postal services include the following exclusive rights:- The conveyance of domestic and inbound international items of correspondence with a maximum weight of 100 grammes at a rate of less than three times the standard single rate for the lowest weight class of 20 grammes (currently three times €0.39 = €1.17). The exclusive right for the conveyance of outbound international items of correspondence has been abolished;
- The exclusive right to place letterboxes intended for the public alongside or on public roads;
- The exclusive right to issue postal stamps and imprinted stamps bearing the effigy of the monarch and/or the word “Nederland”.
These exclusive rights do not extend to courier services or services where the letters are delivered at the rate of more than three times the basic rate of €0.39. The exclusive rights also do not extend to the conveyance of parcels, letters weighing in excess of 100 grammes and printed materials such as advertising, newspapers and magazines. In addition, the exclusive rights do not extend to the conveyance of letters by a business to its own customers.
REGULATORY CONDITIONS FOR THE PROVISION OF MANDATORY POSTAL SERVICES
The Ministry of Economic Affairs has overall responsibility for postal regulation and policy.Regarding mandatory postal services the General Postal Regulations Decree imposes various regulatory conditions on us with respect to service provision, tariffs, cost and revenue accounting, financial administration and reporting. Other than the mandatory postal services, none of our postal services is subject to governmental control.
With respect to service levels, the General Postal Regulations Decree requires us to provide a level of service that complies with modern standards, to provide nationwide services and to perform a delivery round every day, except for Sundays and public holidays. We are required to deliver not less than 95% of all domestic items of correspondence the day after the day of posting, not including Sundays and public holidays. We are required to maintain a network of service points (post offices and agents) for the access of the general public mail services. With respect to rates, we are required to set rates that are transparent, non-discriminatory and uniform. However, we may grant volume discounts for items of correspondence and negotiate specific prices and conditions with high-volume users. We are required to submit proposed rate changes to OPTA, which has to evaluate whether the proposed changes are in accordance with the price cap system.
The price cap system measures tariff developments in two different baskets of 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 a selection of the total basket of domestic mandatory postal services that is representative for consumers and small business users.
The price cap system uses a weighing factor for each service in both baskets. The levels of the indices for both baskets are not to exceed the official national index of wages for employees in the market sector.
The price cap system was evaluated in 2002. On 18 November 2002, the Ministry of Economic Affairs decided that tariffs controlled by the current price cap system should be frozen until the end of 2006. The Ministry of Economic Affairs indicated that in the event postal services became subject to value added tax between 1 January 2003 and 1 January 2007, a change of the frozen tariffs corresponding with the resulting tax burden would be allowed. On 19 June 2003, when the tariff freeze was discussed in parliament, the duration of the freeze was limited to 1 January 2005, awaiting the vision of the Minister on the future regulation of the postal sector. The Minister proposed in his PostalVision sent to Parliament on 1 April 2004 that the temporary tariff freeze would be extended until year-end 2006. On 17 November 2003 we lodged an appeal against the administrative decision to freeze the tariffs. Following the grant of the formal appeal, the temporary tariff freeze decision was declared void in June 2004 and TPG Post remained allowed to amend the individual rates for mandatory postal services, subject to the provisions of the tariff control system.
However, in view of the wider importance of the adoption of an integral and balanced vision for the postal market as submitted to Parliament, we announced our intention not to increase the price of a stamp for consumers from the present level of 39 euro cents for the years 2004, 2005 and 2006. We are considering an
amendment in 2006 to the prices for mandatory postal services to business customers that are covered by the price control system, but this will be kept below the rate of wage inflation for 2004 and 2005.
On 16 December 2004 the Minister of Economic Affairs discussed his vision for the postal market with the members of parliament. During this meeting parliament gave its support to the vision, giving clarity to the following issues:
- Full liberalisation of the postal market in 2007 (conditional on full market liberalisation in the UK and Germany). The vision foresees the possibility of an “emergency brake” procedure that allows the date of the introduction of liberalisation to be shifted to a later stage should the circumstances (delayed factual liberalisation of the German and UK postal markets) call for this.
- The price of a stamp for consumers will remain at 39 euro cents in 2004, 2005 and 2006. TPG may introduce a one-off price increase in 2006 for services to business customers, which are covered by the price control system, but this will be kept below the rate of wage inflation for 2004 and 2005.
- From 2007, rates for services provided under the universal service obligation will be regulated using a price cap system linked to inflation.
- The principle of non-discrimination is to apply to the services of TPG. Competitors and customers are to be treated equally in terms of rates and conditions.
- There is a clearer distinction between general and sector-specific competition monitoring. The Dutch regulator OPTA is charged with monitoring universal service and nondiscrimination requirements.
- A reduction, yet to be fully defined, in the scope of the mandatory postal services.
- From 2007, the Minister of Economic Affairs will assess whether an obligation for us to deliver bulk mail letters up to 50 grammes will remain mandatory for an undefined transitional period, without any rights for us to offset this obligation.
We recognise that the postal vision provides clarity on the most important aspects of postal regulation and gives a long-term framework for the development of the postal market in the Netherlands. In particular, we are pleased with the policy regarding liberalisation as this is conditional to the future de facto liberalisation in the UK and Germany, where liberalisation is also scheduled to take place in 2007.
Amsterdam, 25 February 2005
Board of Management
M.P. Bakker J.G. Haars H.M. Koorstra D.G. Kulik M.-C. Lombard
TPG N.V.
Neptunusstraat 41-63 2132 JA Hoofddorp P.O Box 13000 1100 KG Amsterdam The Netherlands