SHARE CAPITAL

Under our articles of association, our authorised share capital amounts to €1,152 million nominal value. Our authorised share capital consists of:

• 1,200,000,000 ordinary shares,
• 1 special share, and
• 1,199,999,999 preference shares B.

We have called an extraordinary general meeting of shareholders for 27 February 2006 at which we will propose to amend our articles of association in order to decrease the authorised share capital. Upon effectuation of this amendment to the articles of association, our authorised share capital would amount to €864 million nominal value. Our authorised share capital would then consist of:

• 900,000,000 ordinary shares,
• 1 special share, and
• 899,999,999 preference shares B.

Each of the above shares has a nominal value of €0.48.

As at the date of this annual report 479,999,999 ordinary shares and one special share were issued. No preference shares B were issued.

REPURCHASE OF SHARE/SHARE BUY BACK PROGRAMME

On 29 September 2004, we announced that we would repurchase 20.7 million ordinary shares from the State of the Netherlands. Transfer of the repurchased shares took place in two tranches: the first tranche of 7.6 million shares was transferred to us on 4 October 2004; the transfer of the remaining 13.1 million shares was completed on 5 January 2005, both at a share price of €19.74.

On 6 December 2005, we announced a programme to repurchase €1 billion worth of ordinary shares. In December 2005, we repurchased 9,020,000 shares under this programme at an average price of €25.60 per share.

The maximum consideration to be paid per ordinary share under this repurchase programme is the higher of the price of the last independent trade in our shares and the highest current independent bid price on the trading venues where the purchase is carried out. Furthermore, this price will not exceed the normal trade price plus 10%. The normal trade price is the average closing price during the five trading days prior to the day of purchase. Not more than 25% of the average daily volume of the ordinary shares will be repurchased in any one day on the regulated market on which the purchase is carried out. The average daily volume figure is based on the average daily volume traded in the 20 trading days preceding the date of purchase.

In 2005, we did not repurchase any of our shares other than those shares repurchased pursuant to the above publicly announced programmes.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

GENERAL

To our knowledge, no one, except for the State of the Netherlands, owns 5% or more of our shares and there are no arrangements the operation of which might result in a change in our control.

The State of the Netherlands sold part of its ordinary shares in 2005 and owns on 22 February 2006 46,073,810 ordinary shares, representing approximately 10% of our outstanding ordinary shares. Furthermore, the State of the Netherlands owns 1 special share. There are no others holding special shares. The State of the Netherlands announced that it has agreed with ABN Amro-Rothschild, Citigroup and the purchasing parties in July 2005, to not sell any of its shares in TNT until July 2006 (standstill agreement).

For information as to the portion of each class of shares held in the United States and the number of record holders in the United States, see chapter 15.

THE OWNERSHIP INTERESTS OF THE STATE OF THE NETHERLANDS

Overview

An effectively operating postal system is of great importance to Dutch society for various reasons, including economic, strategic and national security reasons, and is therefore of general interest to the State of the Netherlands. For certain important postal services we are the exclusive holder of the Postal Concession granted by the State of the Netherlands (see chapter 13). As a result, we are crucial to the maintenance of an effectively operating postal system in the Netherlands.

The State of the Netherlands holds approximately 10% of our ordinary shares. In addition to being a significant holder of ordinary shares, the State of the Netherlands has influence on us and our affairs through corporate governance mechanisms, its ownership of a special share and a longer term equity interest.

GENERAL

Pursuant to the Enabling Act as currently in force, we are subject to the full Dutch large company regime. Under these rules, we are required to adopt a two-tier system of corporate governance, comprising a board of management and a supervisory board. Under these rules, subject to statutory exceptions, the supervisory board, rather than the general meeting of shareholders,

• has the right to nominate members of the supervisory board for appointment by the general meeting of shareholders,
• appoints and dismisses members of the board of management, and
• must approve certain resolutions by the board of management.

See for further information on the applicable rules on the large company regime page 66.

We have our corporate seat in Amsterdam, the Netherlands. We are registered in the Commercial Register in Amsterdam under number 27168968.

CORPORATE PURPOSE

Article 4 of our articles of association provides that our business activity shall be, among other things:

• to conduct holding activities in enterprises that, among other things, operate in the field of the transportation, distribution and delivery of letters, messages, parcels and goods, as well as the storing, converting and transmitting of information, the management and disposal of information, the providing of logistics services and the providing of money transactions,
• to permit our subsidiaries to carry out the concessions or licences granted by the Dutch government for the activities described above, and
• to conduct other holding and financing activities.

ISSUANCE OF ORDINARY SHARES

We may issue ordinary shares and grant rights to subscribe for ordinary shares, including options and warrants, pursuant to a resolution of the Board of Management, subject to the approval of the Supervisory Board and the holder of the special share. The scope and duration of this authority of the Board of Management is to be determined by the general meeting of shareholders. Under our articles of association as they currently read, we may issue up to a maximum of 1,200,000,000 ordinary shares. Provided that the proposed amendment of our articles of association, that will be submitted to the extraordinary general meeting of shareholders to be held on 27 February 2006, is effectuated, we may then issue up to a maximum of 900,000,000 ordinary shares. On 7 April 2005, the annual general meeting of shareholders extended the current authority of the Board of Management to issue ordinary shares, up to a maximum of 10% of the issued share capital and an additional 10% of the issued share capital in case an issuance takes place in relation to a merger or acquisition. This authority will terminate on 7 October 2006. The general meeting of shareholders can, in accordance with our articles of association and subject to approval of the holder of the special share, extend this authority for a period not exceeding five years or extend this authority by amending our articles of association to that effect. If no such extension is given, the issuance of ordinary shares or rights to subscribe for ordinary shares requires a resolution of the general meeting of shareholders, upon a proposal of the Board of Management approved by the Supervisory Board. Such resolution of the general meeting of shareholders also requires the approval of the holder of the special share.

Each shareholder has the right to attend general meetings of shareholders, either in person or by written or electronic proxy, to address the meeting and to exercise voting rights, subject to the provisions of our articles of association, provided that such shareholder has the aforementioned rights on the applicable record date set by the Board of Management, which date may not in any event be earlier than seven days prior to the date of the meeting. Holders of shares in registered form must notify us in writing of their intention to attend, in each case by the date specified in the notice of the meeting, which date may not in any event be earlier than seven days prior to the date of the meeting. Holders of shares in bearer form must request their relevant associated institution within the meaning of the Dutch Securities Bank Giro Transfer Act (Wet giraal effectenverkeer) to deliver a written statement, to the address specified in the notice of the meeting and in each case by the date specified in the notice of the meeting, which date may not in any event be earlier than seven days prior to the date of the meeting, stating that the relevant holder of shares is entitled to a given number of shares in bearer form on the record date. Instruments of proxy must be delivered to us no later than on the date specified in the notice of the meeting, which date may not in any event be earlier than seven days prior to the date of the meeting. Each of the shares in our capital carries the right to cast one vote. Unless otherwise required by Dutch law or our articles of association, resolutions are passed by a simple majority of votes cast.

Dividend rights

Our articles of association provide that within five months after the end of our financial year, the Board of Management must prepare financial statements accompanied by an annual report, to be adopted by the general meeting of shareholders. Within this same period, the Supervisory Board shall prepare a report that shall be added to the financial statements and the annual report. The general meeting of shareholders can extend this period of five months by a maximum of six months on account of special circumstances.

We pay dividends on profits or by exception out of the distributable part of our shareholders’ equity as shown in our financial statements. We may not pay dividends if the payment would reduce shareholders’ equity below the sum of the paid-up capital and any reserves required by Dutch law or our articles of association. Subject to certain exceptions, if a loss is sustained in any year, we may not pay dividends for that year and we may not pay dividends in subsequent years until the loss has been compensated for out of subsequent years’ profits.

We first have to pay dividends on the special share equal to 7% of its nominal value each year. If preference shares B have been issued and there are remaining profits available for payment of dividends, we then have to pay dividends on the paid-up portion of the nominal value of such preference shares B, at a rate of the average 12-monthly EURIBOR (EURO Interbank Offered Rate) – weighted to reflect the number of days for which the payment is made – plus a premium, to be determined by the Board of Management subject to the approval of the Supervisory Board, of at least one percentage point and at most three percentage points, depending on prevailing market conditions, over the financial year to which the distribution relates.

Redemption provision

None of our ordinary shares is subject to any redemption provisions.

Sinking fund provision

None of our ordinary shares is subject to any sinking fund provisions under our articles of association or as a matter of Dutch law.

Liability to further calls or assessments

All of our outstanding shares are fully paid and non-assessable.

Discriminatory provisions

There are no discriminatory provisions against any of our shareholders as a result of owning a substantial number of shares.

Pre-emptive rights

Except for issuances of ordinary shares for non-cash consideration and issuances to our employees, holders of ordinary shares have pre-emptive rights to subscribe for new issuances of ordinary shares in proportion to their shareholdings. These rights may be restricted or excluded by a resolution of the Board of Management, subject to the approval of the Supervisory Board and the holder of the special share. The State of the Netherlands, in its capacity as holder of ordinary shares and the special share, has agreed with us that it will vote in favour of any proposal submitted annually to the general meeting of shareholders by the Board of Management to extend the authority of the Board of Management to restrict or exclude the pre-emptive rights of holders of ordinary shares. On 7 April 2005, the annual general meeting of shareholders extended the current authority of the Board of Management to restrict or exclude the pre-emptive rights of holders of ordinary shares, up to a maximum of 10% of the issued share capital and an additional 10% of the issued share capital in case an issuance takes place in relation to a merger or acquisition. The authority will terminate on 7 October 2006. Holders of ADSs may not be able to exercise pre­emptive rights granted to holders of ordinary shares.

ACQUISITION BY US OF OUR OWN SHARES

We may acquire our own shares, subject to the requirements of Dutch law and our articles of association, if:

• our shareholders’ equity less the payment required to make the acquisition does not fall below the sum of paid­up capital and any reserves required by Dutch law or the articles of association, and
• after the share acquisition, we would not hold shares with an aggregate nominal value exceeding one-tenth of our issued share capital.

We cannot vote on shares held by us in our own capital.

RELEASE FROM LIABILITIES

At the annual general meeting of shareholders, the general meeting of shareholders is, after the adoption of the financial statements, requested to adopt resolutions, releasing the members of the Board of Management and the members of the Supervisory Board respectively from actual or potential liabilities in connection with the execution of their duties during the financial year. The release from liability obtained by the members of the Board of Management and the members of the Supervisory Board is limited to the facts reflected in the financial statements or otherwise disclosed to the general meeting of shareholders prior to the adoption of the financial statements. However, the scope of a release from liability is subject to limitations by virtue of the law.

INDEMNITY

The company indemnifies the members of the Board of Management and of the Supervisory Board against any and all liabilities incurred by the relevant member as a result of any action brought by any party other than the company itself or its group companies, in relation to acts or omissions related to his/her capacity as a member of the Board of Management or of the Supervisory Board. The company reimburses any expenses incurred by such member in connection with such actions, but only upon receipt of a written undertaking by that member that the member will repay such expenses if a competent court determines that the member is not entitled to be indemnified. This indemnity does not apply to claims relating to the gaining of personal profits, advantages or remuneration to which the member was not legally entitled, or if the relevant member is adjudged to be liable for willful misconduct (opzet) or intentional recklessness (bewuste roekeloosheid). The indemnity does not cover liability of a member of the Board of Management or of the Supervisory Board toward the company itself. Nor does the indemnity apply to the extent claims and expenses are reimbursed by insurers.

REMUNERATION POLICY FOR THE BOARD OF MANAGEMENT/SUPERVISORY BOARD

The general meeting of shareholders adopts the remuneration policy for the Board of Management. The remuneration itself is determined by the Supervisory Board.

The general meeting of shareholders determines the remuneration of the members of the Supervisory Board.

AMENDMENTS TO THE ARTICLES OF ASSOCIATION, STATUTORY MERGER AND DISSOLUTION

A resolution of the general meeting of shareholders to amend the articles of association (including with respect to changing the rights of holders of our ordinary shares), to enter into a statutory merger or demerger within the meaning of part 7, book 2 of the Dutch Civil Code or to dissolve us may only be adopted upon a proposal of the Board of Management that has been approved by the Supervisory Board. The holder of the special share must approve the resolutions of the general meeting of shareholders as described on page 194 under “The ownership interests of the State of the Netherlands”.

When the Board of Management represents the company in a matter described in article 107a, book 2 of the Dutch Civil Code whilst the general meeting of shareholders has not approved the underlying resolution of the Board of Management, the company will be bound towards the third party involved. The approval of the general meeting of shareholders is not indispensable for the Board of Management to effectuate its resolution.

RESTRICTION ON NON-DUTCH SHAREHOLDERS’ RIGHTS

Under our articles of association there are no limitations on the rights of Dutch, non-resident or foreign shareholders to hold or exercise voting rights in respect of our securities, and we are not aware of any such restrictions under Dutch corporate law.

OBLIGATIONS OF SHAREHOLDERS TO DISCLOSE HOLDINGS

The Act on Disclosure of Holdings in Listed Companies 1996 (Wet melding zeggenschap in ter beurze genoteerde vennootschappen 1996) applies to any person who, directly or indirectly, acquires or disposes of an interest in the voting rights and/or the capital of a public limited liability company incorporated under Dutch law with an official listing on a stock exchange within the European Economic Area, if as a result of such acquisition or disposal the interest falls within a different percentage range. The percentage ranges referred to in the Act on Disclosure of Holdings in Listed Companies 1996 are 0-5, 5-10, 10-25, 25-50, 50-66.6 and over 66.6.

Failure to comply with the Act on Disclosure of Holdings in Listed Companies 1996 constitutes an economic offence. In addition, a civil court can issue sanctions against any person who fails to notify, or incorrectly notifies us and the Authority Financial Markets in accordance with the Act on Disclosure of Holdings in Listed Companies 1996. Possible court sanctions include the suspension of voting rights with respect to the ordinary shares held by such person.

MAIL

Our mail division uses 546 sorting centres and distribution depots in the Netherlands. No material portion of our mail properties is subject to any encumbrances. The principal mail facilities are as follows:

EXPRESS

Our express segment uses 882 depots, road and air hubs. The principal express facilities are as follows:

No material portion of our properties is subject to any encumberances.

FREIGHT MANAGEMENT

Freight management uses 126 offices and warehouses, representing in total approximately 175,000 square metres, all of which are leased and none of which are considered principle facilities.

EMPLOYEES

For the number of employees and full-time equivalents see note 19 of our consolidated financial statements on page 144.

In addition to trade unions, we also consult from time to time with various local, national and European works councils.

Employees generally elect the members of works councils. Some of these works councils primarily have an advisory role, but in other cases, e.g. the Netherlands, we may be required to consult or ask approval from one or more of the works councils before proceeding with a course of action. Under Dutch law, our central works council may make recommendations for candidates to fill vacancies on our Supervisory Board. For further information on the recommendation rights of the central works council, see page 198. Furthermore, we are obliged to apprise the European works council of activities that affect our workforce in Europe.

Other regions

Except for our employees in Australia and those of our discontinued logistics business in the United States, our employees outside Europe are generally neither represented by trade unions nor employed pursuant to collective labour agreements. Trade unions represent less than 50% of our employees in Australia and fewer than 50% within our discontinued logistics operations in the United States. Labour relations have been good and we have not, apart from certain labour disputes and some small (1/2 -1 day) work stoppages in 2004 in Australia, experienced any material work stoppages in recent years.

LEGAL PROCEEDINGS

For an overview of the legal proceedings, see chapter 12, page 160.

TAXATION

GENERAL

The following is a summary of the material Dutch and US tax consequences of the ownership of ordinary shares or American Depositary Shares (ADSs), in particular by US holders (as defined below). The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase ordinary shares or ADSs, and prospective investors should consult their professional advisors as to the tax consequences of their purchase, ownership and disposition of the ordinary shares and ADSs, including the consequences under applicable federal, state, local and foreign law. In particular, the summary does not address US holders that do not hold the shares or ADSs as capital assets and the tax treatment of holders subject to special tax rules, such as banks, insurance companies and dealers in securities, investors liable for alternative minimum tax or investors who hold ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, some of which may be subject to special rules. This summary should not be read as extending by implication to matters not specifically discussed herein. Additional rules may apply to holders who themselves or through affiliates actually or constructively own 10% or more of the voting power or value of the ordinary shares or ADSs as determined by US Federal income tax law.

Dutch withholding tax on dividends

Dividends (or similar income derived from shares qualifying as such under the Dutch Dividend Withholding Tax Act 1965 hereinafter referred to as income) distributed by the company are in principle subject to tax at source at the current rate of 25%, which will be withheld and remitted by the company to the Dutch tax authorities.

As regards US holders the following will apply. A US holder can only claim the benefits of the tax treaty for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed on 18 December 1992 between the State of the Netherlands and the United States, as modified by the protocol of 8 March 2004 (together, the 1992 Treaty), if:

• the person is a resident of the United States as defined in the 1992 Treaty,
• the person’s entitlement to these benefits is not limited by the limitations on benefits provisions of article 26 of the 1992 Treaty, and
• the person can be considered to be the beneficial owner of the dividend. A person may not be considered to be the beneficial owner if a dividend would fall under the Netherlands’ anti-dividend stripping rules.

Under the 1992 Treaty, dividends paid by the company to a resident of the United States, other than an exempt organisation or exempt pension trust, as described below, are generally eligible for a reduction of the 25% Dutch withholding tax to 15%, provided that the holder does not carry on an enterprise in the Netherlands through a permanent establishment, permanent representative or fixed base to which or to whom the ordinary shares or ADSs are attributable. If and to the extent the ordinary shares or ADSs are attributable to such a permanent establishment or representative, Dutch withholding tax will in principle amount to 25%. The 1992 Treaty provides for a complete exemption for dividends received by exempt pension trusts and exempt organisations, as defined in the 1992 Treaty. Except in the case of exempt organisations, this reduced dividend withholding rate can be applied for at source upon payment of the dividend; exempt organisations remain subject to the statutory dividend withholding tax rate of 25% and are required to file for a refund of this dividend withholding tax.

A US holder other than an exempt organisation, generally may claim the benefits of a reduced withholding tax rate pursuant to the 1992 Treaty by submitting a Form IB 92 USA, which includes a banker’s affidavit stating that the ordinary shares or ADSs are in the bank’s custody in the name of the applicant, or that the ordinary shares or ADSs have been exhibited to the bank as being the property of the applicant. If the Form IB 92 USA is submitted prior to the dividend payment date, the reduced withholding tax rate can be applied to the dividend.

Losses from one box can, in principle, not be offset against income from another box. The elements of income will be allocated to the spouse or partner that has received the income. A summary of the box system is described below in respect of the ordinary shares and ADSs.

Personal income tax in respect of the ordinary shares or ADSs

RESIDENT INDIVIDUALS OF THE NETHERLANDS AND CERTAIN NON-RESIDENT INDIVIDUALS THAT HAVE ELECTED TO BE TAXED AS A RESIDENT

BOX I (WORK AND PRIVATE RESIDENCE)

An individual Dutch shareholder, who holds the ordinary shares or ADSs that can be attributed to the business assets of an enterprise which is, in whole or in part, carried on for the account of this shareholder, is liable to income tax on the dividends derived from the ordinary shares or ADSs at the progressive rates of box I, the maximum rate being 52%. Income derived or gains realised that qualify as “income from miscellaneous activities” (resultaat uit overige werkzaamheden), which include activities with respect to the ordinary shares or ADSs that exceed “regular, active portfolio management” (normaal, actief vermogensbeheer), are also taxable at the progressive rates of box 1.

BOX II (SUBSTANTIAL INTEREST)

Income from substantial interests (broadly, shareholdings of at least 5% including rights to acquire such shareholdings) is taxed in box II. The tax rate amounts to 25%. Losses from a substantial interest may only be offset against income from a substantial interest and not against income from box I (work and private residence) or box III (savings and investments). There is a possibility for a credit for losses not compensated against the income tax liability of box II. Such tax credit is limited to 25% of the amount of the loss, and can only be claimed on condition that the holder of the substantial interest has sold all of that interest and holds no such interest in another entity. Interest related to the financing of a substantial interest is only deductible against the 25% rate. Income from loans to the company as well as income from other assets which are made available to the company are not taxable in box II, but in box I. Stock dividends received/derived will not be considered to form taxable income in box II at the moment of receipt. The purchase price of such stock dividend will in principle amount to zero.

BOX III (SAVINGS AND INVESTMENTS)

Income derived from capital (savings and investments) is taxed according to the regime of box III. Taxable income is determined annually on the basis of a fictitious -i.e. deemed -return on capital. This deemed return has been fixed at 4% of average net capital, assets less liabilities at market value, on 1 January and 31 December of any year. In this respect, assets and liabilities relating to income from box I and box II are not taken into account. The taxable income is computed without regard to the actual income and capital gains received. Thus, if actual income exceeds 4%, tax will still only be levied on the basis of 4%. On the other hand, there is no reduction in tax if the actual income is less than 4%. The deemed income is taxed at 30%.

An entity subject to Dutch corporate income tax will not be subject to corporate income tax on income derived from the ordinary shares or ADSs if the participation exemption pursuant to article 13 of the Corporate Income Tax Act 1969 applies with respect to the shareholding in the company.

COMPANIES NOT RESIDENT IN THE NETHERLANDS
If the ordinary shares are attributable to a permanent establishment or permanent representative in the Netherlands of a non-resident resident entity, the income distributed by the company will, in principle, be subject to corporate income tax at the rate of 31.5% (29.6% as of 1 January 2006), unless the participation exemption of article 13 of the Corporate Income Tax Act 1969 applies with respect to the shareholding in the company. Any dividend tax withheld can generally be set off against the Dutch corporate income tax due on this income, provided the recipient is the beneficial owner of the dividend.

The State of the Netherlands has concluded tax treaties with Canada, the United States, Switzerland, Japan, all EU member states, Norway and a large number of other countries. Most tax treaties concluded by the State of the Netherlands provide for a reduced dividend withholding tax rate of 15% for portfolio investment.

If the shares are not attributable to a Dutch permanent establishment or a permanent representative, dividends paid to non-resident entities which are shareholders of the company are in principle not subject to Dutch corporate income tax (other than the dividend withholding tax mentioned above), unless the non-resident shareholder holds a substantial interest in the company and the substantial interest does not form part of the business assets of an enterprise of the shareholder. The right of the Netherlands to tax the dividends may be restricted under specific provisions of applicable tax treaties.

Furthermore, the right of the Netherlands to tax the capital gain may be restricted under specific provisions of applicable tax treaties.

Gift, estate or inheritance tax in the Netherlands

Generally, gift, estate and inheritance tax will be due in the Netherlands with respect to the gift or inheritance of the ordinary shares or ADSs if the donor or deceased who owned the ordinary shares or ADSs is or was a resident or is or was deemed to be a resident of the Netherlands for purposes of Dutch gift and inheritance tax.

No gift, estate or inheritance tax will arise in the Netherlands on a gift of the ordinary shares or ADSs by, or on the death of, a holder of the ordinary shares or ADSs who at the moment the gift is made is neither a resident nor deemed to be a resident of the Netherlands for purposes of Dutch gift and inheritance tax, provided that:

• such holder does not die within 180 days after having made a gift, while being on the moment of his death a resident or a deemed resident of the Netherlands, and
• such holder at the time of the gift, or at the time of his or her death did not have, an enterprise or an interest in an enterprise that is or was, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands and to which permanent establishment or a permanent representative, the ordinary shares or ADSs are or were attributable.

If the donor or the deceased is an individual who holds the Dutch nationality, he will be deemed to be resident in the Netherlands for purposes of Dutch gift and inheritance tax if he has been resident in the Netherlands at any time during the 10 years preceding the date of the gift or his death. If the donor is an individual who does not hold the Dutch nationality he will be deemed to be resident in the Netherlands for purposes of Dutch gift tax if he has been resident in the Netherlands at any time during the 12 months preceding the date of the gift. The same twelve-month rule may apply to entities that have transferred their seat of residence out of the Netherlands.

Furthermore, in exceptional circumstances, the donor or the deceased will be deemed to be resident in the Netherlands for purposes of Dutch gift and inheritance tax if the beneficiary of the gift, or all beneficiaries under the estate jointly, as the case may be, make an election to that effect.

UNITED STATES TAXATION

The following is a summary of certain US Federal income tax consequences of the purchase, ownership and disposition of ordinary shares as evidenced by ADSs. This summary does not purport to be a complete analysis of all potential US Federal income tax consequences of the purchase, ownership and disposal of ordinary shares or ADSs.

For purposes of tax treaties and the US Internal Revenue Code of 1986, as amended, US holders that own ADSs will be treated as owning ordinary shares.

Under the 1992 Treaty, the company, other than through its US subsidiaries, will generally not be subject to US Federal income tax unless it engages in a trade or business in the United States through a permanent establishment. The company intends to conduct its business activities in a manner that will not result in its non-US entities being considered to be engaged in a trade or business or to have a permanent establishment in the United States.

Taxation of dividends

To the extent paid out of current or accumulated earnings and profits of the company, as determined under US Federal income tax principles (E&P), a distribution made with respect to ordinary shares or ADSs (including the amount of any additional payment, and any Dutch withholding tax) will be includable for US Federal income tax purposes in the income of a US holder as ordinary income on the day received by the US holder, in the case of ordinary shares, or on the day received by the depositary, in the case of ADSs and will be treated as foreign source dividend income. Distributions in excess of current and accumulated E&P of the company will be treated as a non-taxable return of capital to the extent of the US holder’s adjusted tax basis in the ordinary shares or ADSs and thereafter as taxable capital gain. The company has not historically maintained calculations of earnings and profits under US Federal income tax principles, although it may be required to do so in the future.

Any such dividend paid in euros will be included in the gross income of a US holder in an amount equal to the US dollar value of the euros on the date of receipt, which in the case of ADSs is the date they are received by the depositary. If dividends received in euro are converted into US dollars on the day they are received by the depositary, the US holder generally will not be required to recognise foreign currency gain or loss in respect of the dividend income. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution.

Certain dividends paid to non-corporate US holders of ADSs in taxable years beginning after 31 December 2002 and before 1 January 2009 may be taxable at the rate applicable to long­term capital gains (generally at a maximum rate of 15%). This reduced income tax rate is only applicable to dividends paid by domestic corporations and “qualified foreign corporations” and only with respect to shares held by a qualified US holder

(i.e. an individual) for a minimum holding period (generally, 61 days during the 121-day period beginning 60 days before the ex-dividend date). Based upon the information contained within the filing of this document with the SEC along with other factors the company may be considered a qualified foreign corporation. Accordingly, dividends paid to individual US holders on shares held for the minimum holding period may be eligible for a reduced income tax rate. The reduced income tax rate is not applicable to dividends paid by a company that is a passive foreign investment company for the corporation’s taxable year in which the dividend is paid or for the preceding year. This reduced tax rate for qualified dividends is scheduled to expire on 31 December 2008, unless further extended by congress. Each prospective investor should consult its own tax advisor regarding the implications of this legislation. In the case of a corporate US holder, dividends on shares and ADSs are taxed as ordinary income and will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations.

Taxation of capital gains

In general, a US holder who is a resident of the United States for purposes of the 1992 Treaty and who is entitled to benefits of the 1992 Treaty under the limitations on benefits provision contained therein will not be subject to Dutch taxation on any gain derived from the sale or exchange of ADSs, except in certain instances where the US holder maintains a permanent establishment or fixed base in the Netherlands. A US resident holder of ADSs or ordinary shares generally will be liable for US Federal income tax on such gains to the same extent as on any other gains from sales of stock.

For US tax purposes, US holders will generally recognise gain or loss upon the sale or exchange of ADSs equal to the difference between the amount realised from the sale or exchange of the ADSs and the US holder’s basis in such ADSs. In general, such gain or loss will be US source capital gain or loss. In the case of individual US holders, capital gains are subject to US Federal income tax at preferential rates if specified minimum holding periods are met and if such shares are held as a capital asset. If held for more than one year, such gain or loss will generally be long term capital gain or loss. Long term capital gain of a non-corporate US holder that is recognised on or after 6 May 2003 and before 1 January 2009 is generally taxed at a maximum rate of 15%.

Subject to the discussion below under “Passive foreign investment company considerations”, a US holder will be liable for US Federal income tax on gains from sales or dispositions of ADSs or ordinary shares to the same extent as on any other gains from sales or dispositions of shares.

Passive foreign investment company considerations

In general, a foreign corporation becomes a passive foreign investment company (PFIC) if either 75% of its gross income for a year is “passive income” or 50% of its assets during the year produce or are held for the production of “passive income”. Based on the manner in which the company has historically operated its business, the company does not believe that it is a PFIC for US Federal income tax purposes. However, the company can give no assurances that it will not at some time in the future become a PFIC. If the company were classified as a PFIC for any taxable year during which a US holder held an ADS or ordinary share, certain adverse tax consequences could apply to the US holder. A prospective purchaser of the company’s ADSs should consult with its tax advisor regarding the application of the PFIC rules to its ownership of an ADS or ordinary share.