TPG Annual Overview 2004 by Mattmo

Annual Overview 2004

delivering more

REVENUE SPLIT BY DIVISION 2004

2003

��

Mail Express Logistics

��

TOTAL SHAREHOLDER RETURN

OPERATING INCOME ��

��

�� -20 -40 Total

��

2000

2001

2002

2003

2004

(8.2)

(4.3)

(35.3)

23.5

10.6

�

��

Key ﬁgures

2004 Revenues Operating income (EBIT)

2003

12,635

11,866

6.5%

1,174

767

53.1%

Net income

667

300

122.3%

Underlying net income from continuing operations 1

667

592

12.7%

Operational cash ﬂow

(11)

(10)

(10.0%)

Earnings per share (€ cents)

140.9

63.1

123.3%

Underlying earnings per share (€ cents) 1

140.9

124.6

13.1%

18.8%

Dividend (€ cents)

Social Responsibility footprint

2004 Number of employees

2003

162,244

163,028

Gender proﬁle: male / female (in %)

63 / 37

64 /36

Number of vehicles

22,387

22,026

Number of aircraft

71%

69%

2.9%

Money spent on community initiatives (in € millions)

8,764

4,997

75.4%

CO2 footprint (tonnes of CO2 equivalent)

1,233

1,162

6.1%

ISO 9001 certiﬁcation (% of company covered)

(0.5%)

(2.3%)

Group results

2004 12,635

Total operating expenses Total operating income Gross margin %

Net ﬁnancial (expense) Income taxes Results from investments in afﬁliated companies Minority interests Net income Net income per diluted ordinary share/ADS (€ cents)

2003

Total operating revenues

2002

6.5

11,866

11,782

(11,461)

(3.3)

(11,099)

(10,724)

1,174

53.1

767 6.5

9.0

(77)

16.3

(92)

(108)

(428)

(16.3)

9.3

1,058

(368)

(341)

(3)

50.0

(6)

(5)

200.0

(1)

(5)

667

122.3

300

599

140.7

123.0

63.1

126.1

At TPG, we deliver letters, packages, spare parts and cargo. We deliver on time, every time and just-in-time. But we deliver so much more. Contents

Our business is all about delivering. A letter to a

2004 in brief TPG at a glance

friend across town. Business parcels to the other

Letter to shareholders Group Mail Express Logistics Corporate sustainability Management Information for shareholders TPG in ﬁgures from 2000 Glossary

side of the world. Component parts to an as2 8 16 28 38 50 58 59 62

sembly 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 it’s also our business strategy.

This is the story of how we delivered in 2004.

Letter to shareholders

TPG Annual Overview 2004

Delivering more through great people

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.

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

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%.

TPG Annual Overview 2004

Letter to shareholders

The entire Board of Management visited China in September 2004 for the opening of the new TNT China head ofﬁce in Shanghai. Left to right: CFO Jan Haars, Group Managing Director Logistics Dave Kulik, CEO Peter Bakker, Group Managing Director Mail Harry Koorstra, Group Managing Director Express Marie-Christine Lombard.

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.

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. Express margin development 2004 2003 2002

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. Mail margin and volume development 22.2 20.9 20.1 20.0 19.2

2004 2003 2002 2001 2000 margin (in %)

5,302 5,384 5,521 5,562 5,608

volume mail (in € millions)

Express continued its impressive record of positive quarterly yields, reaching an operating margin of 7.9%. Operationally, the division has delivered great

TPG Annual Overview 2004

2001 2000

7.9 6.5 5.9 4.0 3.8

(in € millions)

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. Logistics margin development 2004 2003 2002 2001 2000

3.7 0.6 4.3 5.7 5.0

(in € millions)

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.

– 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 and Taiwan net sales 335 195 205

2004 2003 2002

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

(in € millions)

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.

TPG Annual Overview 2004

Letter to shareholders

The city of Shanghai is home to the new TNT China head ofﬁce.

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. INDUSTRY LEADERSHIP TOWARDS SOCIAL LEADERSHIP MAIL

EXPRESS

LOGISTICS

TNT

INTEGRITY

PRIDE

CORPORATE SUSTAINABILITY GOVERNANCE CORPORATE PHILANTROPHY FINANCIAL CLARITY

REPUTATION

TPG Annual Overview 2004

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. Does the partnership with the World Food Programme influence your pride in TNT? Yes, very much Yes, a little Neutral No, not really No, not at all

24 39 22 15 0

(in %)

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

TPG Annual Overview 2004

Group

As a global company, we aim to deliver leadership for our industry, society and the world. In 2004, we took steps towards those goals, and we established our TNT1 initiative to ensure that we continue delivering more.

TPG Annual Overview 2004

At TPG, we aim for leadership in all we do. We aim to lead our industry, to be a leader in society and to use our business skills and competencies to deliver tangible benefits for our world. That’s why, in 2004, we moved to more closely coordinate our skills and activities across our three divisions – Mail, Express and Logistics – in order to achieve significant cost savings and, more importantly, to offer our customers a comprehensive range of well-integrated services that meet their individual needs. The initiative is called TNT1 because its principal objective is to create a cohesive organisation with a single purpose – delivering more. By leveraging our efforts in procurement, information and communication systems, shared services such as accounting and finance, and strategic human resource management, TNT1 aims to achieve additional EBITA cost savings of between € 200 million and € 300 million over the coming five years. Moreover, by increasing standardisation within and among each of our divisions, and by taking a cross-divisional approach to serving large accounts, TNT1 will allow us to grow our business by delivering more and better services for all our customers. And it will help us seize the strategic growth opportunities we’ve identified in postal consolidation, China and freight management.

We’re seizing strategic growth opportunities. In postal consolidation, we set forth in 2004 a deliberate strategy for leveraging our world-leading postal efﬁciency to become the frontrunner in the emerging pan-European postal market. As postal market liberalisation continues to unfold across Europe, we aim to capture opportunities through our proven abilities to innovate, to deliver efﬁciencies and cost improvements, and to leverage our growing scale and operational excellence.

In China we established a head ofﬁce in Shanghai. China is important to us not only because of its enormous market potential, but because we’re reaching the market through our new approach – operating as a single organisation, under a single brand, TNT – and integrating our services and activities across divisions. We already gained a substantial foothold. We are the leading logistics supplier to China’s automotive industry. Through our cooperation with China Post we provide inbound and outbound international express services, and we’re exploring further strategic cooperation to leverage our expertise in mail. At the end of 2004, some 2,800 employees were providing services in 500 cities across China.

We made progress in all three areas in 2004.

TPG Annual Overview 2004

Group

Fushing Pang delivered ﬁrst growth in the Chinese market. As senior vice president for strategic development for TNT China, Fushing Pang describes himself as a pioneer. An ethnic Chinese, Pang grew up in Taiwan, then earned an MBA in the United States and began his career there. But in the early days of China’s move to open its borders to international business, Pang couldn’t resist the urge to be part of the action. “I’ve got a pioneering spirit,” he said. “I was excited about the huge potential in China.”

BEIJING, CHINA

Since joining TNT five years ago, Pang has helped the company start seizing the potential of the world’s fastest-developing market. He recalls that when he arrived in China in 1986, roads were much less congested. “Today the roads in the major cities are filled with cars,” he said, offering the traffic analogy as an illustration of the vast changes taking place in China’s economy. With a strong background in business development, Pang has been instrumental in orchestrating significant business partnerships such as TNT’s joint venture with Shanghai Automotive Industry Corporation (SAIC) and its strategic cooperation with China Post. And with the strong commitment TPG pledged to China in 2004,

TPG Annual Overview 2004

Pang sees even bigger opportunities on the horizon. “The major push in 2004 has given us tremendous energy for moving ahead,” he said. “With this kind of commitment we have moved much more aggressively in building alliances and cooperation. We continue building our strong relationships with the Chinese government.” Good government relations is an essential part of success in China, and part of Pang’s role is to head the team that manages that aspect of TNT’s business there. He and his government relations team are located in Beijing so they can be close to government ministries. “By being here, it is easier to make contact with government organisations and we’re better informed about the development in this market,” he said. Pang firmly believes in taking a long-term strategy in China, and he sees 2004 as just the beginning of TNT’s growth there. “In 2004 we sowed the seeds in some major activities that will have significant impact for the company in 2005 and beyond,” he said. “In a market like this, the planting phase is very important. With good seeds, we’ll have plenty of healthy trees and beautiful flowers later.”

We made our ﬁrst big move into freight management in 2004 with the acquisition of Sweden-based freight forwarder Wilson Logistics Group. With a global customer base of 30,000 – and 60% of revenues coming from customers with an international presence – Wilson gives us a strong position in our targeted sectors of automotive, high-tech electronics and fast-moving consumer goods, as well as a strong technology platform in shipping, tracking and logistics management. The experienced management team and 2,300 employees around the world will help us grow our presence in freight management.

We believe that true leadership extends past the borders of our own business. We believe that true leadership extends past the borders of our own business. True leadership, in our view, means delivering more for our industry, for society and for the world at large.

We delivered for our industry, society and the world. We delivered for our industry in 2004 through our participation in the World Economic Forum’s logistics and transport sector corporate citizenship initiative. This initiative aims to establish key performance indicators for logistics and transportation issues by facilitating bi-lateral consultations with stakeholders including customers, suppliers, environmental groups and others.

We aim to deliver more for society by making business decisions that have a positive impact on people around the globe. Our sponsorship of World Press Photo, the major independent platform for photojournalism, is one example. The organisation presents an annual travelling exhibit that highlights important world issues and events through powerful images created by photojournalists. Another example is our decision to purchase our December gift packages for employees in the Netherlands through the Fair Trade Organisation (FTO). Because FTO is dedicated to ensuring that the bulk of proﬁts go to workers who produce the goods, our purchase helps improve the lives of those in developing countries.

TPG Annual Overview 2004

Group

TPG Annual Overview 2004

Fushing Pang, Senoir Vice President Strategic Development, TNT China

“In a market like this, the planting phase is very important. With good seeds, we’ll have plenty of healthy trees and beautiful ﬂowers later.”

TPG Annual Overview 2004

Group

Perhaps our most visible commitment to delivering more for society, however, is our partnership with the United Nations World Food Programme (WFP). Since 2002, we have used our business skills and resources to help WFP solve the world’s most profound logistics challenge – getting food to where it’s most needed. Our partnership includes ﬁve initiatives: joint logistics supply chain, private sector fundraising, emergency response, transparency and accountability, and school feeding support. In addition to achieving milestones in all ﬁve initiatives in 2004, we elevated our commitment to WFP through Walk the World, our worldwide sponsored walk in support of the school feeding initiative. On 20 June, 40,000 TPG employees and their friends and family members participated in the event, collectively walking the circumference of the globe, raising € 700,000 – enough to feed 25,000 children for one school year.

TPG Annual Overview 2004

We aim to deliver more for society by making business decisions that have a positive impact on people around the globe.

Group highlights Financial Revenues 12,635 11,866 11,782

2004 2003 2002

(in € millions)

Earnings from operations 1,174 767 1,058

2004 2003 2002 Underlying1 2004

1,174 1,029 1,058

2003 2002

(in € millions)

Net income 667 300 599

2004 2003 2002 Underlying1 2004

667 592 585

2003 2002

(in € millions)

Operating margin 9.3 6.5 9.0

2004 2003 2002 Underlying1 2004

9.3 8.7 9.0

2003 2002

(in %) 1. Excluding TtS costs (earnings/income) and impairments (income)

Corporate sustainability Coverage of management systems across TPG 2003

2004

65%

71% Investors in People

OHSAS 18001 - Health and Safety

SA 8000 - Social Accountability 1

65%

67% ISO 9001 - Quality management

28%

34% ISO 14001 - Environmental management

1. Compulsory in non-OECD countries

TPG Annual Overview 2004

Mail • Mail Netherlands cost ﬂexibility programme delivered € 45 million in savings • European Mail Networks continue to grow • Revenue challenges in Cross-Border and Data and Document Management

In Mail, we aim to lead the world in postal efﬁciency and to be the frontrunner in the emerging panEuropean mail market. We aim to deliver stable revenues and to maintain our margin at around 20%.

In Mail, we delivered 5.3 billion letters in 2004. We also delivered a 96.5% next-day quality rating in the Netherlands and 16.1% growth in European Mail Networks.

TPG Annual Overview 2004

Demand for mail services continued to be inﬂuenced by the weak economy in 2004. In the Netherlands, domestic addressed mail volumes increased slightly due to more consumer letterbox mail and addressed bulk mail. Direct mail volumes, however, were down, due mainly to increased competition from other networks and other media. Together, these developments put the total volume decline at the low end of the expected range. In our European Mail Networks, we achieved 16.1% revenue growth, but revenues declined in our Cross-Border unit. The overall picture, however, remained stable with our Mail division achieving revenues of € 3.9 billion and a margin of 22%.

31%

62%

In 2004, our Mail division earned revenues of € 3.9 billion, slightly less than in 2003. Mail contributed 31% of TPG revenues and 62% of TPG earnings from operations.

Our cost flexibility programme continues to deliver more savings. Begun in 2001, our cost ﬂexibility programme in the Netherlands has been offsetting volume declines with increased efﬁciencies in automatic sorting, labour conditions and commercial activities. In 2004, we redesigned the TPG Post overhead organisation, and plan to merge our sorting, distribution and transport units. The redesign aims to realise a reduction of between 700 and 800 full-time equivalents among support staff and line managers before 2008.

To minimise negative consequences for employees, we introduced incentives to encourage earlier departures for employees eligible for early retirement in 2006, 2007 or 2008, outplacement assistance and training resources for those who want to pursue careers outside the organisation, as well as exit premiums for

those who voluntarily leave before 2006. By offering these incentives now, we aim to avoid more pressing social issues in the future. By the end of 2004, we had installed about half the planned 286 sequence sorting machines, and had hired more than 5,000 new-style mail deliverers – part-time employees who enjoy ﬂexible work schedules. By the year 2012, we expect to employ 20,000 new-style mail deliverers. From its introduction in 2001 through the end of 2004, our cost ﬂexibility programme has saved € 145 million. When fully implemented, it aims to save € 370 million annually (compared to 2001 cost levels), including € 265 million in our production activities and € 55 million in our marketing and sales activities and € 50 million in overhead reduction. In one of Europe’s most open markets, we deliver more service at a lower price. Our Mail business is subject to national regulation, as well as European and international regulation. In the Netherlands, the Postal Act assigns us the undertaking of certain activities. Through a concession granted by the Dutch government, we hold exclusive rights to perform some of these activities, which comprise approximately 40% of our Mail business in the Netherlands.

TPG Annual Overview 2004

Mail

Erik Brink delivered a means for increased sorting efﬁciency. After joining TPG Post as a management trainee in 1993, Erik Brink found his place in the production area of the company, where six days a week mail is sorted and prepared for delivery to more than 7 million households across the Netherlands.

GRONINGEN, NETHERLANDS

After progressing through several managerial roles, in 1997 Brink helped implement the new sorting structure that comprises six strategically located sorting centres across the Netherlands. With that project complete, he went on to manage one of those sorting centres before being tapped to manage distribution in the Groningen region. “Being a region manager is one of the nicest jobs at TPG Post,” he said. “Not only do I get to interface with the business of collecting and delivering mail, but I also get to work with lots of men and women who actually do the delivery. It’s a lot of communication, a lot of motivation and at the same time keeping a close eye on the budget and the high quality of delivery service.”

TPG Annual Overview 2004

In 2003, Brink took on the additional role of leading the nationwide installation and preparation for implementating 286 new purpose-built sequence sorting machines, part of TPG Post’s so-called Master Plan to proactively combat volume declines and increasing competition. The first of the machines – which use new technology to automate the preparation of postal delivery rounds for some 40,000 mail carriers – were installed in late 2003. The new processes bring optimal efficiency to the collaboration between man and machine. Machines sort the mail, then human carriers ensure each piece is delivered to the home of its recipient. “I really get a kick out of achieving ongoing efficiency in the Mail business, and I get a lot of opportunity to do my thing,” said Brink. “I like the company and the people I work with, and I’m excited about the transformation we’re making to becoming an increasingly streamlined company not only in the Netherlands, but worldwide. That motivates me to keep striving for more.”

More than 50% of addressed mail volumes in the Netherlands, as well as 100% of the market for unaddressed mail, is already open to competition. After Sweden and Finland, the Netherlands has the smallest monopoly in Europe. Our exclusive right to provide mandatory services is conﬁned to delivering letters weighing up to 100 grams or costing less than three times the basic tariff of € 0.39. Direct mail is not covered by the mandatory services in the Netherlands as it is in other countries. The government regulates our mandatory activities

More than 50% of addressed mail volumes in the Netherlands, as well as 100% of the market for unaddressed mail, is already open to competition. with respect to service provision, price controls, cost and revenue accounting, and ﬁnancial administration and reporting. We continued to achieve high levels of service quality in 2004. Next-day delivery reached a summer record of more than 97% in August and averaged 96.5% for the entire year. In June 2004, we announced our intention to not increase the price of a consumer postage stamp from

the present level of € 0.39 for the years 2004, 2005 and 2006. When corrected for inflation, the price of a postage stamp in the Netherlands has actually decreased by 30% over the past 12 years. We are, however, considering a minor amendment to prices for mandatory postal services for business customers covered by the price-control system in 2006. Any adjustment, however, will be kept below the rate of inflation for 2004 and 2005. Our consistently high service levels and low cost make us one of the most efficient mail delivery providers in the world. We support a more open market in the Netherlands. In 2004, the Dutch minister of economic affairs issued the policy for further liberalising the Dutch postal market. This so-called Postal Vision provides a longterm framework for development of the market in the Netherlands, including these key elements: • Full liberalisation of the Dutch postal market in 2007 (dependent on full liberalisation of the markets in the United Kingdom and Germany). • From 2007, universal service will be subject to a price-cap system based on inflation or the consumer price index. • Universal service obligation after liberalisation restricted to single items at fixed rates; obligation to deliver bulk mail letters up to 50 grams for a transitional period. The minister of economic affairs will assess whether this obligation will indeed be necessary. • Competitors and customers to be treated equally in terms of rates and conditions.

TPG Annual Overview 2004

Mail

Erik Brink, Region Manager, Royal TPG Post

â&#x20AC;&#x153; Not only do I get to interface with the business of collecting and delivering mail, but I also get to work with lots of men and women who actually do the delivery.â&#x20AC;?

TPG Annual Overview 2004

Mail

We support the policy and its consideration of the pace of liberalisation across Europe, speciﬁcally that of the two largest markets, Germany and the United Kingdom. We face more competition. In the past decade, a growing number of delivery organisations have entered the Dutch market, delivering not only unaddressed items, but also addressed mail. Our foreign competitors, too, are building positions in the Dutch market. Deutsche Post and Royal Mail already have their own delivery organisations in the Netherlands, and many other delivery organisations include numerous

We aim to be the first pan-European mail company and the second operator in major European countries. potential competitors for addressed mail. Moreover, a large portion of our direct mail volumes is under competitive pressure from other media. We aim to deliver more across Europe. In addition to maintaining our position and profitability in the Netherlands, we aim to be the first panEuropean mail company and the second operator in major European countries. Despite the lingering pace of liberalisation, we remain strong believers in open markets and we continue towards our goal.

TPG Annual Overview 2004

We have domestic mail operations in eight European countries, and we strengthened that presence in 2004 when we acquired the remaining 50% stake of unaddressed mail company Höﬁnger Haushaltswerbung in Germany and the remaining 40% stake of direct mail company DIMAR in the Czech Republic and Slovakia. Through our access agreement with Royal Mail, we also increased our presence in Europe’s second-largest market, where the regulator has announced plans to open 40% of the market to competition. We now are able to offer business customers two-day mail service under the TNT Mail brand and to reach all 27 million households in the United Kingdom. In addition, in 2004 we began delivering heavier-weight addressed letters and parcels for TNT Mail customers in the country. Our Cendris data and document management business offers direct marketing services in the Netherlands, the United Kingdom, Germany, the Czech Republic and Slovakia. In 2004, this business experienced a decrease in the document management business, and continued to be affected by the subdued economy in the Netherlands. Our Cross-Border business, which comprises our Spring joint venture with Royal Mail and Singapore Post, also experienced revenue declines in 2004, partly due to contract rationalisation.

Jan Kalverdijk delivered direct marketing expertise that beat the competition. As a senior account manager in TPG Post’s major accounts department, Jan Kalverdijk knows that in the face of increasing competition, keeping customers demands that TPG Post do more than just deliver direct mail pieces. It must deliver measurable results. And that’s exactly what Kalverdijk and his colleagues did when a national food retailing giant went to a competitor with its order for delivering its weekly sales brochures.

THE HAGUE, NETHERLANDS

As a strategic advisor to large national retailers, Kalverdijk focuses on helping them win customers of their own. “My job is to make sure that the pieces my customers put in the mail are as effective and efﬁcient as possible,” he said. “When you have a name and address, you know who the consumer is, so you know his buying habits and you can make him an attractive offer. But a company can also execute an effective mailing by ﬁnding areas where people of like buying habits live and making them a proposition. We have the knowledge to target those areas and help retailers get customers into their stores.”

Not only does TPG Post’s extensive databases of the Dutch population give it knowledge of the national consumer market, its skilled workforce gives it the ability to ensure that direct mail pieces actually reach the intended consumers. By showing that TPG Post consistently achieves between 95% and 98% accuracy – delivery to the right address on the right day – compared to competitor rates of between 60% and 70%, Kalverdijk and his colleagues not only won back the account, they got a multiple-year extension of the contract. “Our calculation model showed that every piece we accurately deliver represents a certain amount of money that consumer actually spends at the local grocery store,” said Kalverdijk. “Our ability to show the customer the return for their direct mail investment helped them see that TPG Post is not only a distribution company, but a company that knows how to use distribution to achieve marketing results.”

TPG Annual Overview 2004

Mail

TPG Annual Overview 2004

Jan Kalverdijk, Senior Account Manager, Royal TPG Post

â&#x20AC;&#x153; TPG Post is not only a distribution company, but a company that knows how to use distribution to achieve marketing results.â&#x20AC;?

TPG Annual Overview 2004

Mail

Mail highlights Financial

Strategy

Revenues 3,900 3,915 4,005

2004 2003 2002

(in € millions)

Earnings from operations 865 820 804

2004 2003 2002

(in € millions)

Margin 22.2 20.9 20.1

2004 2003 2002

(in %)

Mail revenue split 3,900 3,915 4,005

2004 2003 2002

(in € millions)

Mail Netherlands Cross border European Mail Networks Data and document management

Our ambition is to become the leading provider of business and consumer services for communication, transactions and delivery. We want our Mail operations to be recognised as the industry benchmark for quality, efficiency and customer service, for producing the best returns in the industry and for making optimal use of new technologies and European postal market liberalisation. Our Mail strategy is based on three key elements: • In Mail Netherlands, our focus is on the retention of our current margins by implementing cost flexibility measures. In addition, we continue to offer new services that bring cost savings to our customers’ production chains. • Internationally, we continue to expand along three tracks: - Through our European Mail Networks we offer addressed, unaddressed and segmented distribution solutions for direct mail, brochures, leaflets and samples with an excellent price/quality ratio. - We continue to strengthen our European position through alliances with other organisations and postal operators. - Our 51%-owned subsidiary Spring – our joint venture with Royal Mail Group plc and Singapore Post Pte Ltd. – offers cross-border mail services on a global scale. • In addition to physical mail delivery, we continue to offer mail-related data and document management services, such as direct and interactive marketing services and services for managing physical and electronic information flows.

Sustainability

Market position

Coverage of managementsystems across Mail

Our Mail division provides services for collecting, sorting, transporting and distributing domestic and international mail including letters, printed matter and parcels, as well as for distributing addressed direct mail and unaddressed mail. We also provide a range of data and document management services, including direct marketing and interactive services, and services for managing physical and electronic information ﬂows.

2003

2004

77%

79% Investor in People

OHSAS 18001 - Health and Safety

SA 8000 - Social Accountability 1

80%

83% ISO 9001 - Quality management

69%

80% ISO 14001 - Environmental management

1. Compulsory in non-OECD countries

Our substantial and long experience in the mail industry has helped us become one of the world’s leading postal operators. It also helps us anticipate and respond to the changing market. In addition to providing world-class mail service, we continue to combine our expertise with technology to develop new mail-related data and document management services that meet specific consumer and business needs. We have long viewed our core competence not as merely moving physical mail from one location to another, but as intelligently managing both physical and electronic flows of information. This skill is central to our objective, which is to maintain our margins through the implementation of cost flexibility measures and to maintain market share in the Netherlands, and to achieve growth through international expansion and the provision of mail-related data and document management services.

TPG Post market share in the Netherlands 6%

94%

Source: Annual reports, team analysis

TPG Annual Overview 2004

European Mail Networks Through our European Mail Networks we are building a position to offer our customers a full-service concept for mail, based on high quality and wide coverage in addressed and unaddressed delivery, as well as a broad portfolio of services to reinforce our distribution activities. We currently have a presence in Austria, Belgium, the Czech Republic, Germany, Italy, the Netherlands, Slovakia and the United Kingdom. Our services combine our expertise in data collection and direct marketing to offer customers an intelligent unaddressed service that approaches addressed mail in its ability to target consumers.

Mail Netherlands

2004 Addressed Mail Netherlands items (millions)

2003

%-change

2002

5,302

(1.5)

5,384

5,521

per Netherlands delivery address (items)

707

(2.3)

724

747

per Mail Netherlands FTE (thousands of items)

161

3.2

156

151

per Netherlands inhabitant (items)

325

(1.8)

331

341

(5.6)

Total operating revenues per FTE (thousands of â&#x201A;Ź)

6.7

Average percentage of national mail sorted automatically (%)

per delivery day (millions) 2

1. Excluding international mail items per delivery day (millions). 2. This FTE (full-time employee equivalent) deďŹ nition is based on a 37-hour work week.

Cross-Border Mail productivity statistics

2004 Total Cross-Border Mail volumes (thousands of kilograms)

90.2

2003

%-change (4.5)

94.5

TPG Annual Overview 2004

2002 90.7

Express â&#x20AC;˘ Strong volume growth â&#x20AC;˘ 21 consecutive quarters of positive revenue quality yield â&#x20AC;˘ Expansion in air and road networks

In Express, we aim to be the leader in day/timecertain, door-to-door transport, focussing on business-to-business customers, with the widest geographical coverage. We aim to deliver long-term revenue growth of between 5-10%, and to achieve a 10% margin in 2007.

In Express, we delivered more than 176 million consignments for one million customers in 2004. We also delivered strong earnings and margins increases and a revised strategy aimed at leadership in Europe, emerging markets and special services.

TPG Annual Overview 2004

Despite the mixed global economy, our Express division delivered good results in 2004. Volume growth, particularly in our international business, along with ongoing optimisation of our network and continued revenue quality yield made for a strong performance. By instituting a fuel surcharge, we were able to mitigate the impact of increased fuel prices. Overall revenues were € 4.7 billion with a margin of 7.9%.

37%

27%

In 2004, our Express division earned revenues of € 4.7 billion, a 10.5% increase from 2003. Express contributed 37% of TPG revenues and 27% of TPG earnings from operations.

Volume growth was strong in our home market of Europe, where more than 80% of our revenues originate. We saw strong growth in the United Kingdom, Eastern Europe, Spain and the Netherlands. We also achieved growth outside Europe, particularly in China and the Middle East. Revenue growth was aided by our continued focus on improving revenue quality yield – our composite measure of growth in revenue per consignment and per kilo – by offering the right products, disciplined pricing management and an efﬁcient sales process. We’re enhancing our networks so we can deliver more. With dense coverage in 33 countries, our extensive integrated road and air networks are key to delivering for our customers. We expanded our European network in 2004 by adding 16 new road linehaul connections between eight new European Union member states. We also added a road service to Bosnia in 2004, making it the thirty-third country in our road network, and we added a new road transit hub in Spain. In March, we introduced a direct ﬂight between our

TNT Express European air hub in Liège, Belgium and Turku Airport in Finland. The new daily route improved delivery times for imports to customers by more than two hours and extended collection time for exports by the same period. In September, we replaced a smaller aircraft with a Boeing 737 16-tonne capacity aircraft on our six-day-a-week Liège-Istanbul-Liège route, and in December we replaced a chartered B737 with a second TNT B737. The aircraft are among five new leased B737s that will replace chartered aircraft across our European network. We expect to add an additional aircraft each year in 2005, 2006 and 2007. In May, we introduced global express and airfreight services into Somalia. This twice-weekly service operates between our hub in Dubai in the United Arab Emirates and the Somali capital Mogadishu, with an air connection to Hargeisa in the north of the country. To facilitate delivery to remote areas, we signed an agreement with Somal Post that allows us to access the organisation’s network using its fleet of 19 road vehicles. Also in May, we announced a € 36 million investment to expand and upgrade facilities at our European air hub. The initial investment – to be completed in the first half of 2006 – is part of a six-year plan that will create 245 new jobs at the facility by 2010. The first phase includes doubling sortation space from 28,000 square metres to 56,000 square metres, re-engineering to improve

TPG Annual Overview 2004

Express

Roger Corcoran delivered a turnaround of the Express business in Australia. SYDNEY, AUSTRALIA In his 26 years with the company, Roger Corcoran has helped establish TNT’s business in new markets, including several countries in Asia. But his most recent challenge was not establishing a new business, but turning around the business in what was TNT’s original home market – Australia.

A variety of factors, including poor integration among several business units and problems in administration activities such as invoicing and collections, the business in Australia was experiencing significant losses when Corcoran was tapped to step in. When he arrived in September 2001, Corcoran and a team of new senior managers immediately put in place measures to rectify situation. “The first thing we did was to strangle costs,” he said. Then they embarked on a revenue quality generation programme that included streamlining decision-making and reviewing all contracts and eliminating unprofitable agreements. At the same time, Corcoran and his team launched the division’s seven key processes across the business and began re-building strong alliances

TPG Annual Overview 2004

among our depot managers. Those activities allowed employees to improve the levels of performance and service offered to customers. “We set very clear, but aggressive targets, which allowed us to improve our service drastically and that ultimately allowed us to improve our revenue stream by increasing prices.” The programme worked. In just over two years, the team has increased revenue quality by some 50%. “Our target was to break even by the end of 2003, which we achieved,” said Corcoran. “Then we had to start making money, and 2004 was the year of making real money. We’ve turned this business around not only for our shareholders, but for the 5,000 employees in Australia.” The improved ﬁnancial results are not the only proof that the turnaround worked. “I recently got an email from the largest car manufacturer in Australia, congratulating us on the outstanding logistics service we provide them. It was a powerful statement.”

speed and efﬁciency of sortation systems, expanding ofﬁce space, and improving staff facilities. Phases two and three will add new sortation equipment, increase air container throughput, modernise equipment, and further improve information and other systems.

We laid the foundation that we believe will help us continue delivering more for customers and to grow our business well into the future.

associate network that allows us to serve some 500 cities. We aim to have 35 of our own locations by the end of 2005. Our network development, however, is dependent on infrastructure development within the country. The government has made realising a sound infrastructure a key focus of its most recent economic development programme and is investing heavily in port and city development and highway reconstruction, but realising a modern infrastructure in China is a long-term initiative. We’ve revised our strategy to deliver more to targeted markets. In 2004 we laid the foundation that we believe will help us to not only continue delivering more for our customers, but to grow our Express business well into the future. Our revised strategy builds on our strong position in Europe. It is aimed at achieving leadership in both domestic and intra-European express ﬂows in Europe, leveraging our presence in China to fuel our European network and establish an intra-China network, and seizing the number-one positions in emerging markets in the rest of the world, and in special services.

As there is no commonly shared market definition for the global courier, express and parcel (CEP) market, our strategy begins by defining what we see as our market. The CEP market can be segmented along the axes of transport speed – same-day and in-night, timecertain, next-day, day-certain, and day-uncertain – and weight per consignment. TNT Express market definition

TNT Express entered China in 1988, working with a state-owned joint venture partner. In June 2003, we began operating under our own auspices in 12 locations. In a country of some 10 million square kilometres, we estimate that a pan-China network must cover 100 cities with 140 to 170 locations in order to serve about 1,000 cities and reach 95% of the addressable population. Today, we have 25 companyowned locations supported by an extensive agency and

Same day & in-night Time certain TRANSPORT SPEED

We aim to establish our second home market in China. If the China express market continues its current trend of 25% per annum growth, by 2010 it will be the world’s sixth-largest express market and a key cog in global supply chains. We’re currently outstripping the industry in China, turning in 40% growth in 2004. To sustain that growth, we’re making signiﬁcant investments in our network.

Next day Day certain Day uncertain Document

Parcels

> 1 kg

Freight

31.5 kg

LTL, FTL

1000 kg

WEIGHT PER CONSIGNMENT

We deﬁne our market to include time-deﬁnite and next-day delivery of shipments and consignments transported through a scheduled network. It includes both scheduled and on-call pick-up with drop-off possibilities. It allows for door-to-door tracking-andtracing of individual items, and often includes a money-

TPG Annual Overview 2004

Express

Viviane Reichert, Director, Customer & Market Intelligence, TNT Express

â&#x20AC;&#x153; Thriving in this business is all about our ability to provide better customer service than our competitors.â&#x20AC;?

TPG Annual Overview 2004

Express

Viviane Reichert delivered a clear understanding of customer satisfaction. HOOFDDORP, NETHERLANDS Viviane Reichert knows what customers want. As director of Customer & Market Intelligence for TNT Express, Reichert leads the ongoing process of measuring customer satisfaction and incorporating those ﬁndings into business strategy. And thanks to a comprehensive approach that cascades customer feedback across the organisation, Reichert makes sure that all TNT Express managers also know what customers want. The ultimate aim of the process, she said, is to give TNT Express a competitive edge in the marketplace.

On-time delivery, of course, consistently claims the number-one spot among customer demands. Timely, proactive notiﬁcation of issues that may cause delays comes in second. For instance, said Reichert, when customers ship a package to another country, they want to be informed upfront of any special customs requirements or upcoming national holidays that may delay delivery of their package. Rounding out the top three customer demands is an ability to solve such problems when they arise and to follow through on those commitments. Reichert and her team use a three-step, ongoing process. “Our ﬁrst objective is to measure customer

TPG Annual Overview 2004

satisfaction with our services – to understand what they regard as important and how well we live up to that,” she said. That’s done with a survey sent to a selection of 90,000 customers around the globe three times a year. For each returned survey, TNT Express makes a donation to the World Food Programme, and response rates consistently average around 17%, a significantly high rate for such mailings. Results are compiled using a web-based analysis system that can be accessed by managers around the world, who can monitor customer satisfaction within their own regions or business areas. The second step of the process is benchmarking results against competitors. “This gives us the ability to fill any gaps and to capitalise on our strengths,” said Reichert. The third step is inviting customers to take part in focus groups to provide specifics about what they need and want from TNT Express. In 2004, the process revealed steadily increasing levels of customer satisfaction. But linking the results back to the business is the most crucial step. When that happens, according to Reichert, TNT Express can gain a competitive advantage. “Thriving in this business is all about our ability to provide better customer service than our competitors,” she said. “If we get that right, we can stand out from the crowd.”

TNT Express market share in Europe

24% 33%

2 4

22%

We aim to achieve the number-one position in emerging markets in the rest of the world. In South America, for instance, we’re pursuing selected opportunities in countries such as Brazil. In India, we’re investigating development of the domestic express business, and in Southeast Asia, we’re also working to leverage our relationships with large multinational customers to increase ﬂows into Europe.

7% 9%

1. DHL 2. TNT

3. UPS 4. GeoPost

5. FedEx 6. Other players

back guarantee. Weight can be up to 1,000 kilograms per consignment, and it includes both domestic and international shipments. Our Express market includes only business-to-business shipments, not those going from business to consumer or consumer to consumer. Within this market deﬁnition, TNT Express has a 22% share of the European market.

We also aim to achieve the number-one position in special services such as transporting pharmaceuticals. We’re investigating partnerships with niche players in the United States to serve our vertical market customers, and we’re developing non-network services to provide solutions to customers. For example, we support the logistics of large-scale clinical trial programmes by delivering test kits and medications to research sites, and returning clinical samples to labs located all over the world.

We aim to leverage our relationships with multinational customers in China to fuel consignment ﬂows carried by both air and sea from China to Europe and the rest of the world, and to establish an intra-China network.

TPG Annual Overview 2004

Express

Express highlights Financial

Strategy

Revenues 4,696 4,251 4,175

2004 2003 2002

(in € millions)

Earnings from operations 373 276 246

2004 2003 2002

(in € millions)

Our ambition is to be the leader in day/time certain, door-to-door transport for our business-to-business customers, with the widest geographical coverage. Our global strategy is to: • Be number one in Europe in domestic and intra-European express ﬂows. • Build volume capacity from China to fuel our European network and establish an intra-China network. • Be number one in emerging markets in the rest of the world. • Be number one in special services.

Margin 7.9 6.5 5.9

2004 2003 2002

(in %)

Sustainability Coverage of management systems across Express 2003

2004

77%

79% Investor in People

OHSAS 18001 - Health and Safety

SA 8000 - Social Accountability 1

The most important elements of our strategy are to: • Achieve proﬁtable revenue growth through volume acquisitions at optimised pricing. • Maintain a balanced customer portfolio that includes global accounts, major national, large, medium, small and ad hoc customers. • Focus on product performance. • Improve cost effectiveness. • Ensure quality in all key areas. • Provide high-quality and cost-effective intra-European services through connecting strong domestic businesses. • Secure outstanding levels of customer satisfaction. • Equip employees to fully satisfy customer needs. • Develop leading-edge support technologies that provide added value for customers. • Strengthen the TNT brand and increase top-of-mind awareness of the comprehensive range of reliable on-demand express delivery services we provide.

Market position 67%

69% ISO 9001 - Quality management

14% ISO 14001 - Environmental management

1. Compulsory in non-OECD countries

Our Express division provides on-demand door-to-door express delivery services for customers sending documents, parcels and freight. We offer regional, national and worldwide express delivery services, primarily for business-to-business customers. The Express services we provide and the prices we charge to customers are, in general, classiﬁed by transit times, distances covered and sizes and weights of consignments. In Europe we provide regional, national and pan-European Express services as well as time-sensitive door-to-door services that deliver consignments between Europe and the rest of the world. Our extensive integrated road and air networks give us a strong position in the European market and, with dense coverage in 33 European countries, are an important strategic asset. We also provide door-to-door express delivery of documents, parcels and freight in all areas outside Europe and from these areas to Europe. Our worldwide coverage extends to more than 200 countries. In many of these countries our global Express services are augmented by domestic and regional express delivery services. We also are building our position in Asia and have further improved service levels between Europe and Asia. Our business in Asia is expanding through a mix of organic growth, acquisitions and cooperative ventures such as our alliance ough a mix of organic growth, acquisitions and cooperative ventures such as our alliance with China Post.

TPG Annual Overview 2004

On-time performance

European road network extensions

Q1 New linehauls in 2004

90.5 90.1 90.3

2004 2003 2002

Q2 92.1 90.1 90.9

2004 2003 2002

Q3 92.4 91.3 90.8

2004 2003 2002

Q4 90.9 90.3 89.3

2004 2003 2002

Full year 91.5 90.5 90.3

2004 2003 2002

(in %)

Air and road network development Airports 58 57 54

2004 2003 2002

Number of aircraft 42 43 43

2004 2003 2002

Road connections 33 32 31

2004 2003 2002

Quarterly revenue quality yield development of core volumes in Europe 25 20 15 10 5 0

13.9

14.4

6.7

13.3

7.3

4.2

3.3

2.1

0.8

2.8

6.8

4.9

6.5

2.9

(0.1)

2.5

1.0

0.8

4.7

3.7

9.6

15.8

20.6

14.0

9.0

6.3

5.1

3.6

5.0

1.8

(0.4)

3.3

1.4

2.9

0.7

0.9

5.1

3.0

5.2

7.4

4.1

9.4

1.6

1.8

3.6

1.0

2.9

7.5

5.7

2.8

2.2

2.0

2.4

2.8

4.3

3.3

4.5

2.8

3.2

3.6

4.5

4.2

(in %)

Consignment growth

Kilo growth

Revenue quality yield

TPG Annual Overview 2004

Logistics • Good revenue growth, mainly due to freight management acquisition • TtS programme paying off; annualised savings of more than € 50 million achieved • French business faces challenges

In Logistics, we aim to lead the industry by using world-class technology to provide solutions for complex logistics needs. Long-term, we aim to deliver revenue growth up to 10% and a margin of 4-6%.

In Logistics, we delivered everything from spare auto parts to computers to gourmet coffee in 2004. We also delivered margin improvements and a turnaround of our business.

TPG Annual Overview 2004

Ongoing implementation of our Transformation through Standardisation (TtS) programme and a commitment to future growth delivered results for our Logistics division in 2004. We achieved good revenue growth, due mainly to our acquisition of global freight management company Wilson Logistics Group, and we increased our operating margin. We achieved revenue of € 4.1 billion in 2004 and a margin of 3.7%.

32%

11%

In 2004, our Logistics division earned revenues of € 4.1 billion, a 9.3% increase from 2003. Logistics contributed 32% of TPG revenues and 11% of TPG earnings from operations.

The results achieved through our TtS programme show that TNT Logistics was back on track. As we continue to embed TtS initiatives across our business, we have achieved savings in line with our expectations, and we continue to see high levels of contract renewals and healthy increases in new contracts. In 2004, we marked four successive quarters of earnings growth and of exceeding internal budgets. Our businesses in Germany, Italy and Spain have recovered. As we continue moving towards increased standardisation, our central procurement team is delivering solid cost savings, and we have implemented the JD Edwards back-office system across our business units. Moreover, we have implemented our proprietary Matrix™ software in operations around the world, including Australia, Brazil, Italy, Thailand and the United Kingdom. Our French business unit continued to under-perform in 2004. We have identified the key issues for this deficit and we are taking decisive actions, including making changes in senior management, closing warehouses and rationalising our contract portfolio, to correct the problems. In addition, we’re working to optimise our transportation networks in France and implementing lean warehousing techniques across our operations there. We’ve also increased our business development efforts, particularly in automotive, high-tech and fastmoving consumer goods.

Our move into freight management lets us deliver more for our customers. We made our ﬁrst big move into freight management in 2004 with our purchase of Sweden-based freight forwarder Wilson Logistics Group. This move means that we can now offer our customers the full array of supply-chain management services, including air freight, ocean freight and combined sea/air freight. We had previously met this demand through strategic alliances, such as our partnership with Kintetsu of Japan. Bringing freight management in-house, however, means that we can deliver an integrated, high-quality service.

With a global base of 30,000 customers – many in our target sectors – strong technology assets, an experienced management team and 2,300 dedicated employees, Wilson supports our ambition to expand our business in the high-growth freight management market. As manufacturers continue to seek out efﬁciencies and move their operations to regions with lower costs of production, Asia is an increasingly important arena. China alone is expected to be the world’s third-largest exporter by 2008 and home to up to 30% of the world’s manufacturing by 2013. That translates into huge demand for freight management, and Wilson’s strong presence in Asia should help to accelerate growth across the region.

TPG Annual Overview 2004

Logistics

Onno Meij delivered the transformation of TNT Logistics in the Benelux. CULEMBORG, NETHERLANDS When Onno Meij was named managing director of the Benelux business unit of TNT Logistics in September 2002, the unit was not performing well at all. Service levels were insufﬁcient and as a result, ﬁnancial performance was down. “No one could be happy with the results at that time,” recalled Meij.

Charged with turning around the under-performing unit as part of the division’s Transformation through Standardisation (TtS) programme, Meij and his team of managers set out to create what the unit was sorely missing: a sound structure for improvement, including clear objectives and systems for measuring progress towards those objectives. “We needed to have a clear map of where we wanted to go and how we were going to get there, a plan people could buy into,” said Meij. “We developed a road map to achieve excellence in all parts of our business by the year 2006. And the most important part of the process was to make our objectives clear to everyone so they could get behind those objectives and understand their role in the turnaround.” The plan Meij and his team developed centred on what at ﬁrst might seem like an unlikely measure of business success – happiness. The team reasoned that their ability to turn around the business could be measured by the happiness of four stakeholders – customers, employees, society and shareholders. “We know what makes our customers

TPG Annual Overview 2004

happy – excellent service, continuous cost reduction, and good relationships,” said Meij. And we know what makes shareholders happy – a good return on their investment. We put in place ways to measure our progress in those areas.” The team then set out to deliver the message to every one of the 1,800 employees across the business unit. In addition to communicating via regular team meetings and printed materials, Meij himself makes it a point to visit each site at least four times a year to meet with managers and employees, inform them about ongoing progress and get their feedback. The quest for happiness is paying off. Over the last two years, the business unit improved performance for all four stakeholder groups. Among the progress Meij reported was achievement of the Investors In People standard, ISO 9001 certiﬁcation for quality management and ISO 14001 certiﬁcation for sound environmental management. And the unit’s second annual employee satisfaction survey showed progress as well: Satisfaction levels increased by 6%. Meij sees employee satisfaction as crucial for all other performance indicators. “When we are happy, we’re more motivated. More willing to go the extra step to better serve our customers. More eager to develop ourselves,” he said. “Happy employees are one of the most important resources we have. From happy employees come happy customers and happy shareholders.”

We’re delivering more through our increased global footprint and our network innovator strategy. In 1999, we set out to establish a global footprint that would allow us to offer services in all key logistics markets and to more effectively serve global customers. Today we have operations on all continents and have achieved the critical mass necessary to offer consistent services to multi-national customers.

Today we have operations on all continents and have achieved the critical mass necessary to offer consistent services to multi-national customers. We’ve also set forth our network innovator strategy, which is our plan for becoming an industry innovator in selected sectors. The strategy aims to help us deliver superior value for customers by managing and designing changes in the supply chain. It focuses on six strategic offerings, six target sectors and investments

in key account management, lean warehousing and standardisation. Key account management is crucial to good service delivery because it gives us a better understanding of customer requirements, allowing us to be proactive in meeting their needs. Lean warehousing means precisely what the name implies – managing warehouses in the most lean and efficient manner possible, eliminating all non-value-adding activities. We began implementing the approach across our European operations in 2004. The first wave of implementation in 10 warehouses shows that significant efficiency gains are achievable. Our proprietary software helps us deliver more benefits for customers. Matrix™ is a centrally hosted, integrated suite of supply chain technologies that enables us to manage complex domestic and global supply chains. It provides a link between TNT Logistics and our trading partners. Matrix™ supports inbound just-in-time logistics, outbound logistics and reverse logistics across multiple industry verticals, and integrates transportation, inventory management, order fulfilment, financial settlement and e-commerce applications that enable global collaboration.

TPG Annual Overview 2004

Logistics

TPG Annual Overview 2004

Onno Meij, Managing Director, TNT Logistics Benelux

â&#x20AC;&#x153; Happy employees are one of the most important resources we have. From happy employees come happy customers and happy shareholders.â&#x20AC;?

TPG Annual Overview 2004

Logistics

Matrix™ automatically shares operating data among processes such as strategic planning, optimisation, warehousing activities and back-office functions, and creates significant supply chain efficiencies. The major modules of Matrix™ include: • Matrix™ Designer - strategic network design • Matrix™ Router - real-time routing based on demand from shipping or manufacturing points • Matrix™ Centralised Logistics Manager - event engine that manages the status of all parts, routes and assets • Matrix™ Yard Management and Cross-Dockingradio-frequency-based communications to direct material handlers • Advanced Warehouse Management - all warehousing functionality • Financial Settlement - all transactional activity from the operating systems is used by our financial back-office system, JD Edwards.

TPG Annual Overview 2004

Our ambition is to be the recognised worldwide leader in targeted industry sectors.

Jeff Hoogesteger delivered a successful acquisition in freight management. After starting and running three successful freight management companies, Jeff Hoogesteger was more than a little familiar with the business. That’s why he was the perfect candidate to help TPG explore the global market to ﬁnd its own perfect candidate to move it into the freight management business. Hoogesteger joined TPG as group director, Mergers & Acquisitions in 2001. He worked on mergers and acquisitions for all areas of TPG’s business, but his background gave TPG an advantage to achieve its strategic objective of adding freight management to its portfolio.

GOTHENBERG, SWEDEN

After an extensive search and a nearly 12-month due diligence review, Hoogesteger and his team recommended that TPG purchase Sweden-based Wilson Logistics Group as its ﬁrst step into the global business. “We targeted Wilson because it offered precisely what we were looking for,” said Hoogesteger. “We looked at the company inside and out. We looked at the management team on all continents, the quality of its services and the people who deliver those services. We liked what we saw.”

Hoogesteger and his team then developed a comprehensive plan for integrating Wilson into TPG’s business so it can offer seamless service to customers around the globe. “If there’s one industry that’s beneﬁted from globalisation, it’s freight management,” said Hoogesteger. “Adding this service to our portfolio was a 100% customer-driven proposition. TNT can now make a fantastic offer to our customers, with an array of services that really differentiates us from others. We offer a global network and all the different skills required to operate end-to-end logistics solutions on a global scale. We now cover it all.” After the acquisition, Hoogesteger was selected to serve as managing director of Wilson and now leads its integration into TPG, which he aims to complete by the end of 2005. In the meantime, TPG will be looking for other ways to increase its freight management presence. “This was our ﬁrst step into freight management,” said Hoogesteger. “We will continue taking more steps.”

TPG Annual Overview 2004

Logistics

Jeff Hoogesteger, Managing Director, Wilson

â&#x20AC;&#x153;We targeted Wilson because it offered precisely what we were looking for. We looked at the company inside and out, and liked what we saw.â&#x20AC;?

TPG Annual Overview 2004

Logistics

Logistics highlights Financial

Strategy

Earnings from operations 153 24 157

2004 2003 2002 Underlying1 2004

153 103 157

2003 2002

(in € millions)

Margin 3.7 0.6 4.3

2004 2003 2002 Underlying1 2004

3.7 2.8 4.3

2003 2002

(in %)

Revenues 4,081 3,735 3,610

2004 2003 2002

(in € millions) 1. Excluding TtS costs (earnings/income) and impairments (income)

Sustainability Coverage of management systems across Logistics 2003

2004

29% Investor in People

Our ambition is to be the recognised worldwide leader in targeted industry sectors by designing, implementing and operating complex supply chain solutions and exploiting information technology to achieve integration and visibility throughout the process. Our objectives are to achieve operational excellence, global coverage and leadership in the industry sectors we target. Throughout 2004 we made significant progress in addressing a number of the operational difficulties that negatively impacted our business performance in 2003, despite the continued sluggish economic conditions of both 2003 and 2004. Our long-term Logistics strategy encompasses the following: • Standardise key processes that are intended to bring immediate and significant improvements to the profitability of the division. • Serve specific target industry chains, including inbound automotive and outbound spare parts, tyres, consumer electronics and high-tech, publishing and media, and fast-moving consumer goods/retail. • Achieve “network innovator” status, which means that we aim to be an industry innovator in selected sectors. We will do this by creating superior value for customers through new and additional services supported by our innovative Matrix™ technology, our global presence, and our skill at optimising costs. By overseeing the total supply chain, coupled with control over assets and strong expertise in managing operations, we believe our Logistics division can both capitalise on economies of scale and optimise the utilisation of assets and networks to the benefit of our customers. • Expand our areas of operation in those parts of the globe that our key customers consider important to the growth of their businesses. • Establish a global freight management capability, providing both our existing and future customers with a more complete supply chain solution.

Market position OHSAS 18001 - Health and Safety

SA 8000 - Social Accountability 1

44%

53% ISO 9001 - Quality management

With operations in 39 countries, our Logistics division provides services focussed on supply chain management. One key aspect of this service is reducing the time it takes to bring goods from suppliers to their customers by using the latest technology to increase visibility of goods in the supply chain. This objective comes on top of the traditional logistics goal of ensuring that – across the functions of procurement, manufacturing and distribution – the right goods, in the right quantities and condition are available at the right place and time. TNT market share in contract logistics

ISO 14001 - Environmental management

1. Compulsory in non-OECD countries

Through a combination of targeted acquisitions and organic growth, we have built a truly global Logistics business with signiﬁcant operations in Europe, North and South America, Asia and Australia. Our acquisition strategy has focussed on achieving critical mass in selected geographies and six industry sectors: inbound automotive; outbound spare parts; tyres; consumer electronics and high-tech; publishing and media; and fast-moving consumer goods/retail. With a few exceptions in certain segments, we believe we have achieved critical mass in terms of market presence and customer base in every market we serve.

3% 2% 2% 1 23

1% 5%

87%

1. TNT 2. UPS 3. DHL

4. Wincanton 5. Exel 6. Other players

Source: Annual reports, TNT estimates

TPG Annual Overview 2004

Global footprint

North America 6,790 employees 72 warehouses 1,600,000 m2

Nordics

7,700 employees 69 warehouses 800,000 m2

Benelux

South East Asia

3,500 employees 64 warehouses 440,000 m2

1,886 employees 69 warehouses 510,000 m2

Italy

France 3,100 employees 43 warehouses 750,000 m2

5,077 employees 14 warehouses 340,000 m2

648 employees 14 warehouses 291,000 m2

Germany & Eastern Europe

2,600 employees 18 warehouses 285,000 m2

South America

China

1,200 employees 19 warehouses 136,000 m2

Spain

6,398 employees 85 warehouses 1,600.000 m2

Australia

Turkey

730 employees 12 warehouses 170,000 m2

560 employees 25 warehouses 155,000 m2

372 employees 2 warehouses 58,000 m2

Logistics operating revenue per industry

2004 Automotive

%-of total

2003

%-of total

2002 1

%-of total

1,455

35.8

1,428

38.2

1,379

38.2

642

15.7

635

17.0

655

18.1

Hi-tech and electronics

503

12.3

499

13.4

445

12.3

Publishing and media

250

6.1

229

6.1

238

6.6

221

5.9

219

6.1

Fast-moving consumer goods

Tyres

177

4.3

Freight management (Wilson)

279

6.8

Other

775

19.0

723

19.4

674

18.7

4,081

100.0

3,735

100.0

3,610

100.0

Total

1. Restated to reﬂect the impact of the transfer of In-night services from express to logistics.

2004 Business development efﬁciency

2003

18%

2004 Number of warehouses Number of square metres managed (in thousands)

2002

22%

2003

20%

2002 1

655

471

415

7,098

6,607

6,186

Joint ventures Number of warehouses Number of square metres managed (in thousands)

1,359

969

968

1. Restated to reﬂect the impact of the transfer of In-night services from express to logistics.

TPG Annual Overview 2004

Corporate sustainability

When it comes to corporate sustainability, we promise transparency about the economic, environmental and social dimensions of our business. In 2004, we made good on that promise, sharing our results with the world.

TPG Annual Overview 2004

We recognise that some of these data are subject to a degree of uncertainty due to the various methods and measurement techniques used to determine the environmental and health and safety data. Building sustainability into our business is an ongoing process, which we will continue to develop when reﬁning our data and reporting systems for our future reports.

This year, for the first time, we’re making our corporate sustainability report public. This move confirms our commitment to be open about how we manage the economic, environmental and social dimensions of our business, how our business affects people and the world, and how we aim for continuous improvement. The report sets forth our corporate sustainability strategy and goals, and measures our progress towards meeting those goals. You can find the full report on our website at www. tpg.com. Sustainability was important to all three of our businesses long before our group was formed in 1998. In 2000, we began aligning the various initiatives within our three divisions. In 2002 we adopted a corporate sustainability policy, and signed the United Nations Global Compact, which deals with human rights, labour rights and environmental protection. We support the standards of the Organisation for Economic Cooperation and Development and the International Labour Organisation, and our TPG Business Principles are based on these guidelines. Also in 2002, we established an annual award competition to recognise outstanding contributions to sustainability within the company, made preparations for reporting according to the guidelines of the Global Reporting Initiative, and set up a sustainability process with the company. Reporting on our efforts is the next step in our corporate sustainability journey. Covering our activities for 2003 and 2004, our report establishes baseline measurements for issues that affect key stakeholders – our customers, our people, our shareholders and our world. Because we see corporate sustainability as an integral and necessary part of our ongoing business, and not as a separate activity, we are reporting our 2004 corporate sustainability results alongside our 2004 financial results.

With respect to performance data, we present figures from only those parts of our organisation that are externally certified against the standards explained below. This is because we believe that only these data really make sense since the certificates guarantee active management. Corporate sustainability: The challenge and our ambitions For too many organisations, sustainability simply means avoiding liabilities or not doing bad things. At TPG, we define it differently. For us, the essence of corporate sustainability is an active search for opportunities to make our world a better place. It’s about actively doing good things.

To guide our pursuits, we have set forth our corporate sustainability ambition on three consecutive levels. Think of it as a three-tiered pyramid with global standards at the base, industry-related initiatives in the middle and TPG’s unique approach to corporate sustainability at the top. We’re building from the ground up. Manage: Meet the standards We have selected leading international standards to ensure that we can fulﬁl and measure our corporate sustainability promises in the course of our day-today business. The following systems for measuring actions have already been implemented across many of our business units. By 2007, they are expected to be implemented across all business units. • ISO 9001 to ensure operational excellence • OHSAS 18001 to ensure safe workplaces • ISO 14001 to ensure responsible treatment of the environment • Investors in People to enable our employees to continuously develop • SA 8000 to demonstrate social accountability, particularly in non-OECD countries • Global Reporting Initiative guidelines to report corporate sustainability performance.

TPG Annual Overview 2004

Corporate sustainability

Luis Rivera, Shipping Supervisor, TNT Logistics

“ Being involved in the Moving the World partnership made me feel part of something very big, something great. I’d do it again in a heartbeat.”

TPG Annual Overview 2004

Corporate sustainability

Luis Rivera delivered clean water – and baseball equipment. As a shipping supervisor for TNT Logistics’ contract with Hewlett-Packard in Puerto Rico, Luis Rivera takes pride in delivering the right goods when and where his customer needs them. But the satisfaction he gets from running the shipping operation pales in comparison to how he feels about his work for the World Food Programme (WFP).

AGUAVILLA, PUERTO RICO

Rivera joined the company three years ago when Hewlett-Packard outsourced its logistics operations to TNT, and he was among the first team of eight volunteers who spent three months working with WFP’s school feeding programme. Rivera and Sandra Moneta of TNT Argentina worked with schools in Nicaragua. Their first task was to determine what the schools needed to be able to provide healthy meals to students. “The first thing we saw was that there was no electricity and no water,” recalled Rivera. “It rains a lot in Nicaragua, but the water is used for so many purposes it’s no longer good for drinking. Supplying electricity would have been difficult, but water we could do something about.” Rivera and Moneta proposed installing water collection tanks, simple water filters and working stoves at

TPG Annual Overview 2004

each school. Then, working with local WFP staff and parents, they successfully installed those three items at a school with about 80 students. Having clean water and a functioning stove for cooking the cereal, rice and beans WFP provides meant children got hot, nutritious meals. “For many of these kids, this is the only food they get each day,” said Rivera. Clean water and stoves are not the only items lacking at the schools. “A class of ﬁve kids might have two pencils and one notebook to share,” said Rivera. When Rivera and Moneta arrived, the children played baseball with a stick and a ball of yarn, using their hats as baseball gloves. “Nicaragua loves baseball, and the kids love to play it after lunch,” said Rivera. After meeting the students’ need for food, Rivera and Moneta wanted to give them something more, so they asked their colleagues back home to donate money to buy some real baseballs, bats and gloves. “Of course we should take care of their health and help them study, but they are kids. They also need to play.” Rivera’s work with WFP has reinforced his bond to TNT. “My colleagues and I work in Hewlett-Packard’s facilities,” he said. “Our building doesn’t even have a TNT sign on it, but being involved in the Moving the World partnership made me feel part of something very big, something great. I’d do it again in a heartbeat.”

Mail

Express

Logistics

TPG

24% 63%

64%

46% 54%

37% 76% Fully owned operations (including rent and lease contracts and temporaty staff)

Our ambition is to certify all our fully owned operations. The charts above show the scope of our ambition, indicating the balance between fully owned operations and subcontractors.

DIFFERENTIATE IMPROVE MANAGE

Improve: Sector reputation The second tier of our ambition calls for us to help enhance the reputation of our entire sector. We aim to do that via the World Economic Forumâ&#x20AC;&#x2122;s logistics and transportation corporate citizenship initiative, which comprises companies from across the industry, from sea freighters to TPGâ&#x20AC;&#x2122;s key global competitors. We have been actively involved in this group since mid-2003.

Chairmanship of the group is awarded annually to a participating company, and in 2004 TPG CEO Peter Bakker led the effort. In January, a number of the CEOs of participating companies signed the Logistics and Transportation Corporate Citizenship Principles and called on their peers to place corporate citizenship at

36%

Contracted out (suppliers, agents, subcontractors)

the centre of their business strategies. TPG is one of the signatories. The principles include conducting a consultation with key sector stakeholders. The consultation was begun in 2004, when 182 organisations provided input on those corporate citizenship issues they believe the sector should focus on. It continued with a discussion with customers, which will be followed in 2005 by one with employees. Based on this input, involved companies have engaged in a stakeholder dialogue facilitated by the Global Reporting Initiative with the purpose of agreeing key performance indicators (KPIs) relevant for the sector, and encouraging an industry-wide ambition to manage according to those KPIs.

TPG Annual Overview 2004

Corporate sustainability

Stefania Lallai delivered employee empowerment through information. TURIN, ITALY Stefania Lallai joined TNT Express in Italy in 2001 with a clear mandate. When the business unit’s ﬁrst Investor in People survey revealed employees’ need to know more about their company, Lallai was hired to establish the unit’s ﬁrst internal communication department to cascade information to the more than 3,000 people who work in 135 depots and 162 locations across Italy.

One of Lallai’s first objectives was to help employees see that TNT is larger than their own environments, that the company depends on their contributions each day, but that it also transcends the network in Italy. “If you only see your part of the work, you cannot perceive what a great feat it is to deliver a parcel from the other side of the world to a customer in Italy,” said Lallai. “Behind every parcel we deliver is an enormous world that is constantly moving. It’s really an amazing company.” Also central to Lallai’s mandate was cascading business strategy to employees at all levels. To get those messages across, Lallai and a team established an intranet that reaches all depots and locations. “The site really shortened the distances between the field and head office,” she said. “It created a sense of teamwork and started the process of employee involvement.”

TPG Annual Overview 2004

To continue that momentum, Lallai also developed the business unit’s ﬁrst social report in 2001. Capturing information about the business unit and presenting it in a document that adheres to Global Reporting Initiative guidelines and is certiﬁed by independent auditors, Lallai reasoned, was one of the best ways to inform employees. Lallai’s reasoning proved sound. Now in its third year, the report is distributed not only to employees, but to customers, subcontractors, social associations and other stakeholders. It has drawn employee feedback that led to development of a career-track training programme, garnered attention from the Italian ministry of welfare, and served as the catalyst for a dialogue with employees and customers. Lallai sees the report and the actions that have resulted from it as central not only to the unit’s communication strategy, but to its business strategy. “To me, being a leader means providing clear, factual communication about what we really are. It’s important to face the market with an awareness that we are a great company, but with a humble approach of serving our customers and stakeholders in the best way we can. When you can show you’re great, you don’t have to shout it. People will see that and they will follow you.”

TPG has set an objective to meet key milestones in the second tier of its corporate sustainability ambition – improving our sector reputation – by 2006. Differentiate: Lead the industry The third tier of our corporate sustainability ambition aims to distinguish TPG from its peers. Here, we have defined three specific areas where we want to put TPG at the front of the industry: • Delivering Clean: Supporting the reduction of carbon dioxide emissions by helping to develop a “clean” truck. • Driving Safety: Developing a plan to enhance road safety and reduce the number of road accidents we’re involved in; leveraging this experience to develop a tailor-made road safety plan for China. • Moving the World and Moving our City: Helping the World Food Programme fight hunger; developing a neighbourhood survey to assess needs and make focussed contributions to worthy causes in our own communities.

Our rating in the Dow Jones Sustainability Index In 2004, TPG’s economic, environmental and social dimensions were reviewed and rated by the Dow Jones Sustainability Index. TPG received a total sustainability score of 46 out of a possible 100 points. The bestranked company received a total score of 69. TPG’s overall sustainability performance Total score

46 44 69 Economic dimension

53 65 70 Environmental dimension

39 25 76 Social dimension

46 43 72 (in %)

We see corporate sustainability as an integral and necessary part of our ongoing business.

Average score Company score Best score

GET MORE INFORMATION Visit these links on the TPG corporate website for detailed information about: TPG Business Principles www.tpg.com/ corporategovernance/ TPGbusinessprinciples/index.asp TPG Whistleblower Policy www.tpg.com/ corporategovernance/ TPGbusinessprinciples/ whistleblowerpolicy/index.asp Compliance to Global Compact www.tpg.com/ corporatesustainability/ unglobalcompact/index.asp Compliance with World Economic Forum principles www.tpg.com/ corporatesustainability/ roadtosocialleadership/improve/ index.asp World Economic Forum stakeholders survey www.tpg.com/downloads/html/bilateral_stakeholder_consultation_ v281204.html Dow Jones Sustainability Index assessment www.tpg.com/images/Dow_ Jones_Sustainability_World_ Index_Assessment_2004_ tcm31-75044.pdf

TPG Annual Overview 2004

Management M.P. (Peter) Bakker (1961) Peter Bakker is Chief Executive Officer of TPG and chairman of the Board of Management. He joined TPG Post in 1991. In 1996, he was appointed financial control director of TPG Post, and was nominated to the TPG Post board of management in 1997. From the demerger from KPN in June 1998, Bakker was chief financial officer of TPG and a member of the Board of Management. On 1 November 2001, he was appointed CEO and chairman of the Board of Management. Bakker is a Dutch national and earned a degree in economics from Erasmus University in Rotterdam. Number of TPG shares owned: 12,832

J.G. (Jan) Haars (1951) Jan Haars is chief ﬁnancial ofﬁcer of TPG and a member of the Board of Management. He joined the company in August 2002. Prior to that, Haars worked for ABN AMRO Bank, Thyssen Bornemisza Group, Royal Boskalis Westminster, Rabobank Nederland, and most recently as worldwide group treasurer of Unilever N.V. Haars is a Dutch national and earned a degree in applied mathematics from the University of Twente in Hengelo. Number of TPG shares owned: 12,903

H.M. (Harry) Koorstra (1951) Harry Koorstra is Group Managing Director Mail and a member of the TPG Board of Management. He joined TPG Post in 1991 as managing director of its Media Services business unit and became a member of its board of management in 1997. Before joining the company, Koorstra worked for 15 years at the Netherlands’ largest publisher, VNU. Koorstra is a Dutch national and earned degrees in civil engineering and business economics from the Polytechnic in Amsterdam and Dordrecht. Number of TPG shares owned: 12,031

M.C. (Marie-Christine) Lombard (1958) Marie-Christine Lombard is Group Managing Director Express and a member of the TPG Board of Management. She joined the company in 1998 when TPG acquired Jet Services, where she was managing director. She served as managing director of TNT Express France until her appointment as Group Managing Director Express on 1 January 2004. Lombard is a French national and earned a master’s degree in business from ESSEC Business School in Paris. Number of TPG shares owned: 0

D.G. (Dave) Kulik (1948) Dave Kulik is Group Managing Director Logistics and a member of the TPG Board of Management. He joined the company in September 2000 when TPG purchased CTI Logistx, where he was president and CEO. He served as managing director of TNT Logistics North America before his appointment as Group Managing Director Logistics on 1 September 2003. Kulik is an American national and earned a degree in transportation management from Youngstown State University in Youngstown, Ohio. Number of TPG shares owned: 5,871

J. (Jeroen) Brabers (1953), Corporate Secretary

TPG Annual Overview 2004

Information for shareholders

Since 29 June 1998, following our demerger from KPN, our ordinary shares have been listed on the Amsterdam Stock Exchange (which was renamed Euronext Amsterdam in connection with the merger of the Amsterdam, Brussels and Paris stock exchanges in 2000), the London Stock Exchange, the New York Stock Exchange and the Frankfurt Stock Exchange. The principal market for trading in TPG ordinary shares is Euronext Amsterdam. TPG is included in the AEX index, which comprises the top 25 companies in the Netherlands, ranked on the basis of their turnover in the stock market and free ﬂoat. We have an unrestricted sponsored American Depositary Receipt (ADR) facility with Citibank N.A. as depositary. The ADRs evidence American Depositary Shares (ADSs), which represent the right to receive one ordinary share. The ADSs trade on the New York Stock Exchange under the symbol TP.

Average daily volume (in shares) in 2004:

2004

2003

1st quarter

1,654,655

1,356,444

2nd quarter

1,492,099

1,242,102

3rd quarter

1,491,089

1,404,351

4th quarter

1,559,948

1,272,351

The highest quotation of TPG shares during 2004 was € 20.15 on 7 October and the lowest was € 16.22 on 24 March. A total of 5,836,500 shares in the form of ADRs were traded on the New York Stock Exchange in 2004, compared with 5,674,500 in 2003.

2004

2003

2002

Stock price (in €) High

20.15

19.34

25.07

Low

16.22

11.71

14.98

19.98

18.57

15.45

140.9

63.1

126.1

Dividend in € cents

57.0

48.0

40.0

Dividend pay-out ratio (as a %)

40.5

76.1

31.7

Earnings per outstanding share in € cents

Dividend yield (based on closing rate for the year) P/E Ratio Number of issued shares Stock market capitalisation (in € billions)

2.85

2.58

2.59

14.18

29.41

12.26

480,259,522

9,596

8,823

7,420

TPG Annual Overview 2004

Information for shareholders

Stock performance 21

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Our relative performance on the AEX at closing prices during 2004 (AEX index rebased to TPG)

35 30 25 20 15 10 5

1998

1999

2000

2001

2002

2003

2004

Our relative performance on the AEX at closing prices since its listing in 1998 (AEX index rebased to TPG)

Our ordinary shares are held worldwide in the form of bearer shares, non-ADS registered shares and ADSs. Outside the United States, ordinary shares are held primarily in bearer form. In the United States, ordinary shares are held primarily in the form of ADSs. Only bearer shares are traded on Euronext Amsterdam and the other European exchanges on which our ordinary shares are listed. Only ADRs relating to ADSs are traded on the New York Stock Exchange. The following table indicates the form in which the ordinary shares were held as of 22 February 2005:

Forum

Number of shares

Bearer shares Non-ADS registered shares ADSs 1

Percentage of outstanding ordinary shares

385,065,260

80.18%

89,376,767

18.61%

5,817,496

1.21%

1. Held by approximately 55 holders of record. Since some shares are held by brokers and other nominees for their clients, this number may not be representative of the actual number of ordinary shares held by US residents or of the actual number of US-resident beneﬁcial holders of ordinary shares.

TPG Annual Overview 2004

On 4 October 2004, TPG took delivery of 7.6 million shares at €19.74 per share. On 5 January 2005, TPG took delivery of another 13.1 million shares at the same price. As of that date, the State of the Netherlands owns 18.6% of TPG’s ordinary shares. In 2004, 398.7 million TPG shares were traded on the Euronext Amsterdam market (2003: 336.6 million).

Peer group comparison For comparative reasons, we have deďŹ ned a peer group of publicly listed companies with activities in the same industries in which TPG is active. This peer group consists of the Germany-based company Deutsche Post World Net (DPWN) with activities in mail, express and logistics; the United Kingdom-based company Exel, with activities in logistics; Switzerland-based Kuehne & Nagel, with activities in freight management and logistics; as well as the two United States-based express carriers FedEx (FDX) and United Parcel Service (UPS). For this peer group, the comparative performance in terms of total shareholder returns in 2004 is charted below. 80

-20 AEX

Eurotop 300

DPWN

FDX

UPS

EXEL

Kuehne & Nagel

TPG

6.8%

(11.6%)

6.2%

46.2%

16.4%

1.8%

59.1%

10.6%

Total shareholder return 40

-20

-40 2000

2001

2002

2003

2004

(8.2)

(4.3)

(35.3)

23.5

10.6

Dividend We aim to meet shareholder return requirements through dividends and growth in value of our shares. TPG annually pays interim and ďŹ nal dividends in cash, denominated in euros. Exchange rate movements will affect the amounts received by ADS holders on conversion by the depository of such cash dividends. 60 50 40 30 20 10 0

1997

1998

1999

2000

2001

2002

2003

2004

TPG Annual Overview 2004

Information for shareholders

TPG in ﬁgures from 2000 Year ended at 31 December

2004

2003

2002

2001

2000

Mail

3,900

3,915

4,005

3,896

3,706

Express 2

4,696

4,251

4,175

3,910

4,145

Logistics 2

4,081

3,735

3,610

3,353

2,179

(42)

(35)

(8)

(94)

12,635

11,866

11,782

11,218

9,936

4,305

4,163

4,027

3,836

3,230

Intercompany / Non allocated Total operating revenues Salaries /social security contributions Depreciation, amortisation and impairments Other expenses Total operating expenses Total operating income as % of total operational revenues

Net ﬁnancial (expense) / income Income taxes Results from investments in afﬁliated companies Minority interests Net income

533

711

490

437

343

6,623

6,225

6,207

5,928

5,542

11,461

11,099

10,724

10,201

9,115

1,174

767

1,058

1,017

821

9.3%

6.5%

9.0%

9.1%

8.3%

(77)

(92)

(108)

(93)

(60)

(428)

(368)

(341)

(335)

(282)

(3)

(6)

(5)

(1)

(4)

(1)

(5)

(3)

(2)

667

300

599

585

473

Fixed assets

5,083

5,057

5,573

5,587

5,216

Current Assets

3,199

2,858

2,693

2,867

2,380

Total Assets

8,282

7,915

8,266

8,454

7,596

Group Equity 3

2,784

2,986

2,979

2,613

2,199

Provisions

1,237

817

1,036

1,173

1,311

Long-term liabilities

1,646

1,661

1,789

577

2,615

2,451

2,590

2,879

3,509

8,282

7,915

8,266

8,454

7,596

937

1,032

Short-term liabilities Total liabilities and group equity

Net cash provided by operating activities

1,000

773

572

Net cash used in investing activities

(338)

(373)

(518)

(698)

(1,242)

Net cash used by ﬁnancing activities

(500)

(436)

(598)

125

592

Changes in cash and cash equivalents

162

128

(84)

200

(78)

Interest cover (times)

15.2

8.3

9.8

10.9

Average total capital

8,099

8,091

8,360

8,025

6,909

Return on average total capital

14.5%

9.5%

12.7%

11.9%

13.7

Return on Assets

14.2%

9.7%

12.8%

12.0%

10.8%

Net return on Equity 3

24.0%

10.0%

20.1%

22.4%

21.5%

Gearing at year end

23.6%

26.4%

32.0%

39.8%

37.7%

290

287

398

454

388

Capital expenditures on major ﬁxed assets as % of turnover

2.8%

3.0%

4.0%

4.3%

3.9%

Capital expenditure on investments as % of turnover

1.8%

0.6%

1.2%

2.9%

-0.3%

Cash conversion efﬁciency

7.9%

8.8%

6.9%

5.8%

Capital expenditure on PPE

Number of ordinary shares on diluted basis (in millions)

474.0

475.4

475.0

475.1

477.3

Net income per diluted ordinary share (€)

1.41

0.63

1.26

1.23

0.99

Total shareholder return (%)

10.6

23.5

(35.3)

(4.3)

(8.2)

(in € millions, unless otherwise stated) 1. Restated to reﬂect the impact of the changes in accounting principles in 2001. 2. Restated to reﬂect the impact of the transfer of Innight services from express to logistics. 3. Per 1 January 2003 dividends proposed, but not yet declared, are to be presented as a component of equity instead of a liability. The prior year balances are adjusted for comparison purposes.

TPG Annual Overview 2004

2005 financial calendar 28 February Announcement of 2004 full-year results 7 April TPG Annual General Meeting of Shareholders 11 April Ex-dividend listing of TPG shares 18 April Payment of final dividend 4 May Publication of 2005 first-quarter results 29 July Publication of 2005 half-year results 31 October Publication of 2005 third-quarter results Publications TPG Share is a Dutch-language quarterly magazine distributed to 14,000 individual shareholders and other interested readers in the Netherlands. This magazine and other publications can also be viewed and ordered through our website. Websites For the latest and archived press releases, corporate presentations and speeches, current share price and other company information such as our online annual report and interim reports, visit our website at www. tpg.com.

Our website also offers special sections with information about Corporate Governance and Investor Relations, and links to the websites of Euronext Amsterdam; the United States Securities and Exchange Commission; AFM, the authority for Dutch financial markets; and other public institutions. Our interactive site is continuously refined to better reflect those topics of interest to investors. It is possible to subscribe via the website to regular e-mail updates about our company and related topics.

TPG Investor Relations Through our Investor Relations activities, we aim to provide shareholders with accurate and timely information. We proactively and openly communicate with institutions and private investors and with intermediary groups such as analysts and ﬁnancial journalists.

In addition to the quarterly, half-yearly and yearly financial results presentations, we maintain regular contacts with financial analysts and retail and institutional investors through meetings, roadshows, conference calls and visits. In 2004, we visited investors in major financial cities in Europe, the United States and Asia. Our annual report on Form 20-F is filed electronically with the United States Securities and Exchange Commission. Mailing address TPG Investor Relations P.O. Box 13000 1100 KG Amsterdam The Netherlands Visiting address Neptunusstraat 41-63 2132 JA Hoofddorp The Netherlands Telephone Fax E-mail Website

+31 20 500 6455 +31 20 500 7515 investorrelations@tpg.com www.tpg.com

We also invite you to visit www.tnt.com and www.tpgpost.com.

TPG Annual Overview 2004

Published by

TPG N.V. P.O. Box 13000 1100 KG Amsterdam The Netherlands

This annual overview includes a summary of the information presented in the ofﬁcial 2004 annual report of TPG N.V. (TPG). A Dutch translation of this document is also available.

Telephone General + 31 20 500 6000 Investor Relations + 31 20 500 6241

Information contained in this overview and the annual report can also be found on our website. For additional copies of the English or Dutch overview or report, e-mail a request to annualreport@tpg.com, fax a request to + 31 26 319 5221 or send a request to TPG Investor Relations.

Fax + 31 20 500 7000 Website www.tpg.com Chamber of Commerce Amsterdam Reg. No. 27168968 Coordination and design Mattmo concept | design www.mattmo.com Photography Anton Corbijn Lithography and printing De Bussy Ellerman Harms Binding Binderij Hexspoor

Note about forward-looking statements Except for historical statements and discussions, statements contained in this document are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. These forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are outside our control, and may cause actual results to differ materially from any future results expressed or implied in the forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which TPG operates, management’s beliefs and assumptions made by management about future events. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including, but not limited to those described in our 2004 annual report. As a result of these and other factors, no assurance can be given as to TPG’s future results and achievements. You are cautioned not to put undue reliance on these forward-looking statements, which are neither predictions nor guarantees of future events or circumstances. TPG disclaims any obligation to publicly update or revise these forward-looking statements, whether to reﬂect new information, future events or circumstances or otherwise.

TPG Annual Overview 2004

Glossary of terms used in this annual overview Average total capital The averaged sum of the total assets of two consecutive years.

Interest cover (times) Total operating income divided by net ﬁnancial (expenses)/income.

Capital expenditures on investments as % of turnover The capital expenditures on acquisitions of new, or stake increase in existing group and/or afﬁliated companies as a percentage of total operating revenues.

International Organization for Standardization (ISO) The ISO is a network of national standards institutes from 146 countries working in partnership with international organisations, governments, industry, business and consumer representatives. The ISO is the source of ISO 9000 standards for quality management, ISO 14000 standards for environmental management, and other international standards for business, government and society. For more information, see www.iso.org.

Capital expenditures on major fixed assets as % of turnover The capital expenditures on property, plant and equipment and other tangibles as a percentage of total operating revenues. Cash conversion efficiency Net cash provided by operating activities as a percentage of total operating revenues. Corporate governance The OECD (see reference elsewhere in this glossary) defines corporate governance as the system by which corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions. By doing this, it also provides the structure through which company objectives are set, and the means of attaining those objectives and monitoring performance. Dow Jones Sustainability Indexes Launched in 1999, the Dow Jones Sustainability Indexes are the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide. They provide asset managers with reliable and objective benchmarks to manage sustainability portfolios. For more information, see www.sustainability-indexes.com. Free cash flow Cash flow from operations minus net capital expenditure on plant, property and equipment and other intangible assets. Gearing at year end The net debt as percentage of total group equity plus net debt. Global Reporting Initiative (GRI) The GRI is a multi-stakeholder process and independent institution whose mission is to develop and disseminate globally applicable sustainability reporting guidelines for voluntary use by organisations reporting on the economic, environmental and social dimensions of their business. The GRI incorporates participation of business, accountancy, investment, environmental, human rights, research and labour organisations from around the world. Started in 1997, the GRI became independent in 2002, and is an official collaborating centre of the United Nations Environment Programme, and works with the United Nations Global Compact. For more information, see www.globalreporting.org.

Operating revenues Net sales and other revenues. Organisation for Economic CoOperation and Development (OECD) The Organisation for Economic CoOperation and Development (OECD) comprises 30 member countries that share a commitment to democratic government and the market economy. Member countries – sometimes referred to as OECD countries – represent the world’s key developed countries. For more information, see www.oecd.org. Return on assets The total operating income as a percentage of the total assets.

Investors in People Developed in 1990 by a partnership of leading businesses and national organisations, Investors in People helps organisations to improve performance and realise objectives through the management and development of their people. For more information, see www.iipuk.co.uk.

Return on average total capital The total operating income as percentage of the average total capital.

ISO 14001 (environmental management) The ISO 14001 standard is an international standard for the control of environmental aspects and the improvement of environmental performance. Minimising harmful effects on the environment and achieving continual improvements in environmental performance.

SA 8000 (social accountability) SA8000 is a standard issued by human rights organisation Social Accountability International (SAI). The standard is designed to maintain just and decent working conditions throughout a supply chain. It is based on international workplace norms in the International Labour Organization conventions and the UN’s Universal Declaration of Human Rights and the Convention on Rights of the Child. It covers child labour, forced labour, health and safety, freedom of association and right to collective bargaining, discrimination, discipline, working hours, compensation and management systems. For more information, see www.sa-intl.org.

ISO 9001 (quality management) The ISO 9000 standards cover an organisation’s practices in fulfilling the customer’s quality requirements and applicable regulatory requirements while aiming to enhance customer satisfaction and achieve continual improvement of its performance in pursuit of these objectives. Key Performance Indicators (KPIs) KPIs are measures that focus on the achievement of outcomes critical to the current and future success of an organisation. These indicators should deal with matters that are linked to the organisation’s mission and vision, and are quantified and influenced where possible. Net return on equity Net income as a percentage of total group equity. OHSAS 18001 (occupational health and safety) OHSAS 18001 is a standard for occupational health and safety management systems. It is intended to help organizations control occupational health and safety risks, and was developed in response to widespread demand for a recognised standard for certification and assessment. OHSAS 18001 was created through collaboration of several of the world’s leading national standards bodies, certification organisations and consultancies. For more information, see www.ohsas-18001-occupational-healthand-safety.com.

Revenue quality yield The percentage change year-on-year in revenue per consignment plus the percentage change year-on-year per kilo divided by two.

Sarbanes-Oxley The Sarbanes-Oxley Act was signed into law on 30 July 2002, introducing significant legislative changes to financial practice and corporate governance regulation. It also introduced a number of deadlines, where multinational companies must meet the financial reporting and certification mandates for any end-of-year financial statements filed after 15 November 2004 (amended from 15 June). The act is named after its main architects, Senator Paul Sarbanes and Representative Michael Oxley, and followed a series of high-profile scandals, such as Enron. Sarbanes-Oxley allows firms to stay abreast of the proposed and final rules and regulations issued by the United States Securities and Exchange Commission to implement the Act. For more information, see www.sarbanes-oxley. com. Total shareholder return The total share price appreciation (or depreciation) plus return on reinvestment of gross dividend. (Source: Bloomberg Professional)

World Economic Forum The World Economic Forum is an independent international organisation committed to improving the state of the world. It provides a collaborative framework for the world’s leaders to address global issues, engaging its corporate members in global citizenship. For more information, see www.weforum.org and “Principles of Corporate Citizenship.”

TPG N.V. P.O. Box 13000 1100 KG Amsterdam The Netherlands Telephone +31 20 500 6000 Fax +31 20 500 7000 www.tpg.com Royal TPG Post P.O. Box 30250 2500 GG The Hague The Netherlands Telephone +31 70 334 3434 www.tpgpost.com TNT P.O. Box 13000 1100 KG Amsterdam The Netherlands Telephone +31 20 500 6500 www.tnt.com