TNT Annual Report and Form 20-F 2006

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RISK FACTORS

Any of the following risks could have a material adverse effect on our financial position, results of operations, liquidity and the actual outcome of matters to which the forward-looking statements contained in this annual report refer. The risks described below are not the only risks that we are facing. There may be additional risks to the ones described below of which we are currently unaware. These risks may be common to most companies. There may also be risks that we now believe are immaterial, but which may ultimately have a material adverse effect as described above. For further information on forward-looking statements see the notice on forward-looking statements on page VI of this annual report. For further information on our internal risk management and control systems see chapter 7.

The increasing substitution of alternatives for our mail delivery services could reduce the revenues and proﬁtability of our mail business and adversely affect our revenues and proﬁtability.

Our mail business is an integral part of our total business and during 2006 represented 40.4% of our group operating revenues and 59.6% of our group operating income. Our postal mail business delivers information such as letters and bank statements as well as printed matter such as direct mail and periodicals. Technologies such as e-mail and internet (e.g. electronic banking) can be used to send or make available such information faster and, in many cases, at a lower price than traditional mail services. Due to increased substitution, among other factors, traditional mail volumes in the Netherlands have decreased in recent years, and we expect this downward trend in mail volumes to continue in the next few years. An increase in the use of these substitute technologies would likely result in a further decrease in the use of our traditional mail services. If substitution continues on a large scale, it could adversely affect the volumes, revenues and proﬁtability of our mail business and our company as a whole.

The further liberalisation of the Dutch and EU postal markets could adversely affect our revenues and proﬁtability.

In the Netherlands, the process of liberalisation of the postal market, which began in the late 1980s, is continuing. This presents a number of risks to our mail business. Pursuant to the EU Postal Directive, as of 1 January 2006 the restriction that reserved the provision of letters up to 100 grammes exclusively to us (the reserved postal services) was reduced to 50 grammes. On 13 April 2006 the Dutch government decided to fully liberalise the postal market in the Netherlands in 2008 on the condition that there is a level playing field with the British and German postal markets. The Dutch government also agreed upon the proposal for a new Dutch Postal Act. The proposal for a new Dutch Postal Act follows the vision of the Dutch Minister of Economic Affairs on the postal market in the Netherlands, which was published in 2004. As discussed in greater detail in chapter 13, this new Dutch Postal Act addresses a number of issues that are directly relevant to our business, including price controls and the scope of the mandatory postal services. The new Dutch Postal Act may adversely affect our business, revenues and proﬁtability. For example, a possible expanded role for OPTA, the Supervisory Authority for Post and Telecommunications in the Netherlands, in controlling our price determination for competitors might have an adverse effect on our competitive position. The Dutch cabinet’s decision to fully liberalise the postal market in the Netherlands and the proposal for a new Dutch Postal Act still await approval of the Dutch parliament. The new Dutch Postal Act is expected to be discussed by parliament during the course of 2007.The new Dutch government could have a revised vision for the new Dutch Postal Act. The governmental vision could, for example, accelerate further liberalisation of the Dutch and EU postal markets leading to unequal market conditions compared to the United Kingdom and Germany; increase price control; or cause changes in requirements of the Universal Service Obligation. Any of these may adversely affect our business, revenues or profitability.

On 18 October 2006 the European Commission published its proposal to amend the EU Postal Directive. The European Commission proposes to fully liberalise the EU postal market per 1 January 2009. The European Commission believes that there are alternative methods, other than the current reserved area, to finance the Universal Service Obligation (USO). The proposal abolishes the reserved area as a USO financing mechanism, but allows for a wide variety of other methods, such as tendering, public funds, compensation funds and universal service requirements. The European Commission also opts for a model that leaves the Member States the discretionary powers to decide upon the scope of the USO. The new EU Postal Directive may adversely affect our European Mail Networks business. For example, if the new EU Postal Directive provides for insufficient guarantees, Member States can abuse national USO regulation to protect their national operators.

The proposal of the European Commission awaits approval by the Council of Ministers and the European Parliament. The EU decision-making process is likely to take around one and a half years.

Intensifying competition may put downward pressure on prices and could have an adverse effect on our revenues and proﬁtability.

We compete with many companies and services on a local, regional, European and international level. Our competitors include the incumbent postal operators of other nations in Europe, Asia, Australia and the United States, motor carriers, express companies, logistics service providers, freight forwarders, air couriers and others. We expect competition to intensify in the future in all of our core business areas. Targeted, aggressive actions by competitors may negatively impact our prices. In the Netherlands, our present market share in the mail business results from being the former government-operated monopoly. We expect our market share to erode due to serious competition and, in the longer term, the continuing liberalisation of the Dutch mail regulatory regime. In Europe, we continue to face strong competition in both our mail and express businesses. Our strategy focuses on a differentiated product and price approach and the quality of services related to price rather than on price discounts. Nevertheless, increased competition may force prices for our services down and thus cause our revenues and proﬁts to decrease.

The trends towards liberalisation of European postal markets may also result in further consolidation within the mail and express businesses as competitors seek to expand into newly opened geographic markets and former state postal monopolies enter into acquisitions or alliances in order to expand the range and geographic coverage of their services. Consolidation within our businesses may result in increased competition and, as a consequence, adversely affect our business, revenues and proﬁtability.

For example in August 2006, the major Dutch banks, several health insurers and some other large companies, each responsible for sending high volumes of mail, pooled their interests and set up the “Vereniging Grootgebruikers Postdiensten (VGP)”, an organisation to represent their mutual interests in the addressed mail market. The VGP claims to represent approximately 14% of the addressed mail market. . This could adversely affect our mail division’s revenue.

A sustained economic downturn could adversely affect our business and ﬁnancial condition.

Developments and trends in the world economy may have a material adverse effect on our ﬁnancial condition and/or results of operations. Because our express delivery business has high ﬁxed costs and greatly depends on high volume to recover such costs, a global economic downturn could have a material adverse effect on the results of our express delivery business, and this would adversely affect the results of our business as a whole. In addition, a continued economic downturn could lead to our customers asking for price reductions that could adversely affect our margins. A slow economy may also result in a continued decline in demand for direct mail in the Netherlands.

Unfavourable decisions of competition authorities concerning joint ventures, acquisitions or divestments could restrict our growth, strategic progress, proﬁtability and ability to compete in the market for our services.

As a part of our strategy to focus on our core business, from time to time we seek alliances with or acquire shares in companies that complement our core business, or we divest part of our business. Any approval of a joint venture, an acquisition or a divestment of shares or a business by competition authorities may contain certain restrictions or conditions with respect to the intended transaction.

We may not be able to implement a transaction as contemplated in compliance with any restrictions or conditions imposed by the Merger Task Force of the European Community or national competition authorities, and these restrictions or conditions may negatively affect the revenues and proﬁtability of our businesses. If we are unable to implement a foreseen transaction under the restrictions or conditions applicable, or if the intended transaction is prohibited, we may be unable to develop alternative approaches. This would have an adverse effect on our ability to pursue our focus on our core business.

Compliance with regulations may result in a signiﬁcant cost increase and limit our ﬂexibility in operating our business and negatively affect our costs and proﬁtability.

We are subject to a wide variety of complex and stringent aviation, transportation, environment, employment and other laws and regulations in the Netherlands, the EU and the other jurisdictions where we operate. Existing regulations are subject to constant revision, and new regulations are constantly being adopted. The interpretation and enforcement of such laws and regulations vary and could limit our ability to provide our services in certain markets. It is uncertain whether existing laws and regulations or future regulatory, judicial and legislative changes will have a material adverse effect on us, whether national or international regulators, competition authorities or third parties will raise material issues with regard to our compliance or non-compliance with applicable laws and regulations, or whether other regulatory activities will have a material adverse effect on our business, revenues and proﬁtability.

For example, in our express businesses, we operate various types of aircraft throughout Europe and we started a direct service between Europe and China in January 2007. As a result we are required to comply with a wide variety of international and national laws and regulations. In some of the markets in which we operate, regulations have been adopted (or proposed) which impose night-time take-off and landing restrictions, aircraft capacity limitations and similar measures in order to address the concerns of local constituencies.

We rely on night-time operations at our Liège, Belgium air express hub for some of our international express business. A curtailment of night-time take-offs and landings at any of our key facilities, such as Liège, would likely harm our business. Some governments have imposed stringent new security measures on air carriers that could result in additional operating costs. Our failure to comply with or the costs of complying with existing or future government regulation, could negatively affect our revenues and proﬁtability. In addition, existing or future regulation on transport of goods may negatively affect our ability to perform our services to our customers or may increase the costs of providing our services. In our mail business in the Netherlands, from time to time discussions come up whether or not we should provide access to our mailboxes as a collecting point for our competitors. Our competitors currently focus on large volume clients and do not compete in the consumer market. Change in this view of competitors and support of this view by the regulator could negatively affect our costs and proﬁtability.

We are exposed to various global and local risks that may have a material adverse effect on our ﬁnancial condition and results of operations.

We operate around the globe and provide a worldwide service with facilities in many countries, which means that we are confronted with complex legal and regulatory requirements in many jurisdictions. These include tariffs, trade barriers and requirements relating to withholding taxes on remittances and other payments. Our international operations are also exposed to local business risks and challenges. We face potential difﬁculties in stafﬁng and managing local operations, succession coverage of key individuals and talent management. We are exposed to the credit risks of local customers and distributors. In many of the jurisdictions in which we operate, in particular emerging markets such as China, India, Brazil and Russia, aspects of the developing legal system (including the inability to enforce contracts, the lack of an independent and experienced judiciary, and similar factors) create an uncertain environment for investment and business activity. These difﬁculties will increase as we pursue our strategy to expand our operations to new markets. Our overall success as a global business depends, in part, on our ability to succeed in different economic, social, political and legal conditions. We may not succeed in developing and implementing policies and strategies that are effective in the locations where our business is conducted. Failure to do so may have a material adverse effect on our ﬁnancial condition and results of operations.

We are exposed to currency and interest rate ﬂuctuations that could have an adverse effect on our results and ﬁnancial condition as well as on the comparability of our ﬁnancial statements.

A signiﬁcant part of our total revenues and our operating expenses as well as our assets and liabilities are denominated in currencies other than euro. As we expand our international operations, we expect that an even greater portion of our revenues, costs, assets and liabilities will be denominated in non-euro currencies. The exchange rates between these currencies and the euro may ﬂuctuate substantially. As a result, currency ﬂuctuations could have a material adverse effect on our results and ﬁnancial condition in any given reporting period and may affect the comparability of our ﬁnancial statements from period to period.

Part of our borrowings and leases are against ﬂoating interest rates. These ﬂoating interest rates may ﬂuctuate substantially and could have a material adverse effect on our results and ﬁnancial condition in any given reporting period.

Although we generally enter into hedging arrangements and other contracts in order to attempt to reduce our exposure to currency and interest ﬂuctuations, these measures may be inadequate or may subject us to increased operating or ﬁnancing costs.

A decline in the value of the euro could reduce the value of your investment in TNT and any dividends received.

Since its introduction on 1 January 1999, the value of the euro relative to the dollar has ﬂuctuated widely. Fluctuations in the exchange rate between the US dollar and the euro will affect the US dollar equivalent of the euro price per American Depositary Share (ADS) and the US dollar value of any cash dividends. If the value of the euro relative to the US dollar declines, the market price of our ADSs is likely to be adversely affected. Any decline in the value of the euro would also adversely affect the US dollar amounts received by shareholders on the conversion of any cash dividends paid in euro on our ADSs.

A downgrade in our credit rating may increase our ﬁnancing costs and harm our ability to ﬁnance our operations and acquisitions, which could negatively affect our revenues and proﬁtability.

A downgrade in our credit rating may negatively affect our ability to obtain funds from ﬁnancial institutions, retail investors and banks and increase our ﬁnancing costs by increasing the interest rates of our outstanding debt or the interest rates at which we are able to reﬁnance existing debt or incur new debt. On March 10, 2006, Standard & Poor’s Ratings Service (S&P) lowered its corporate credit ratings on TNT to “A-“ long-term / ”A-2” short-term from “A”/”A-1”. On 25 September 2006 S&P issued an updated Issuer Credit Rating. S&P maintained the TNT corporate credit ratings on “A-“ long-term / ”A-2” short-term. The S&P outlook is negative. On 27 March 2006 Moody’s Investors Service downgraded the issuer and senior unsecured debt ratings of TNT N.V. to “A3” from “A2”, and the CP rating of TNT Finance BV, 100% owned and guaranteed finance subsidiary of TNT, to Prime-2 from Prime-1. On 12 July 2006 Moody’s Investors Service issued an updated TNT credit opinion. The issuer and senior unsecured debt ratings of TNT N.V. continued to be “A3”, and the CP rating of TNT Finance BV was kept at Prime-2. The Moody’s outlook for the ratings is stable.

We depend on a number of infrastructure facilities for which we have limited or no comparable back-up facilities, so if operations were disrupted at one or more of these facilities, our business and results of operations would suffer.

A portion of our infrastructure is concentrated in single locations for which we have limited or no comparable back-up facilities or very expensive fall back scenarios in the event of a disruption of operations. An example of this is our European express air hub in Liège, Belgium. The operation of our facilities involves many risks, including power failures, the breakdown, failure or substandard performance of equipment, the possibility of work stoppages or civil unrest, natural disasters, catastrophic incidents such as airplane crashes, ﬁres and explosions and normal hazards associated with operating a complex infrastructure. If there were a signiﬁcant interruption of operations at one or more of our key facilities and operations could not be transferred or only at very high costs to other locations we might not meet the needs of our customers, and our business and operating results would be adversely affected.

Incidents resulting from our transport of hazardous materials or a major incident involving our sorting centres, warehousing facilities, air or road ﬂeet may adversely affect our revenues, proﬁtability and reputation.

We transport hazardous materials for a number of our customers in the automotive, biomedical and chemical industries. The hazardous consignments include airbags, batteries, paint, blood samples, medical substances, dry ice and chemicals. As part of our express, freight management and mail services, we may also transport hazardous or dangerous goods without having been notiﬁed about the nature of the goods we transport. We face a number of risks by transporting these materials, such as personal injury or loss of life, severe damage to and destruction of property and equipment and environmental damage. Incidents involving these materials could result from a variety of causes including sabotage, terrorism, accidents or the improper packaging or handling of the materials. If a signiﬁcant incident occurred our operations could be disrupted and we could be subject to a wide range of potentially large civil and criminal liabilities. This could negatively affect our revenues and proﬁtability. A signiﬁcant incident, particularly a well-publicised incident involving potential or actual harm to members of the public, could also hurt our reputation.

As an owner and operator of a large ﬂeet of aircraft and trucks we are involved in activities which expose us to liability in the case of a major air or road incident, not only for our employees, facilities and third party property, but also for the general public. An incident involving one of our aircraft or vehicles could cause signiﬁcant loss of life and property and could adversely affect our reputation and the price of our shares.

A major incident caused by hazardous materials could lead to additional measures or restrictions imposed on us by local or governmental authorities. Such additional measures or restrictions could disrupt our processes and may adversely affect our revenues, proﬁtability and reputation.

We may not accurately forecast our future infrastructure requirements, which could result in excess capacity or insufﬁcient capacity and negatively affect our revenues and proﬁtability.

In order to maintain our market position and grow our business we must make large on-going investments in infrastructure such as aircraft, trucks and depots. We base our infrastructure investments on forecasts of our future capacity requirements. It may be difﬁcult to forecast accurately our future requirements, since they are based on a large number of factors, including factors beyond our control such as general economic conditions and changes in governmental regulation. As a consequence, there may be a mismatch between our investment and our actual requirements. If we underestimate our future capacity requirements we will not be able to meet the needs of our customers and could lose business, market share, revenues and proﬁts. If we overestimate our future needs, or if major contracts are cancelled by customers, we will experience costly excess capacity and this could adversely affect our proﬁtability.

Strikes, work stoppages and work slowdowns by our employees and the terms of new collective labour agreements could negatively affect our revenues and proﬁtability.

The success of our business also depends upon avoiding strikes, work stoppages and slowdowns by our employees. Industrial action by large unions or even relatively small but key groups of our employees, such as airline pilots, could seriously disrupt our operations. Industrial action may occur for reasons unrelated to our collective labour agreements with a particular union or group of employees. For example, our employees may refuse crossing picket lines established by other unions from other companies. Our collective labour agreement with approximately 57,000 employees in the Netherlands is subject to a renewal in October 2007. If we are not able to renew this agreement or other key agreements with our employees, and a strike, work stoppage or work slowdown occurs, our revenues and proﬁtability could be adversely affected.

Our business may be negatively affected by the terms of collective labour agreements that we conclude with our employees. These terms could include increases in compensation and employee beneﬁts, work rules less ﬂexible than those of our competitors, and limitations on future workforce reductions and other factors that make our workforce less mobile. Our proﬁtability could suffer if we are not able to conclude collective labour agreements on satisfactory terms with our employees.

The integration of our newly acquired businesses involves signiﬁcant challenges and costs and may not be successful, which could adversely affect our results of operations.

We have entered into a number of signiﬁcant acquisitions in recent years with growth through acquisitions remaining a key element of our strategy. We have also announced the acquisition of several other companies which will be ﬁnalised in 2007. The integration of newly acquired businesses involves inherent costs and uncertainties that include the effect on the acquired businesses of integration into our organisation and culture and the availability of and demands on management resources to oversee the integration and manage the newly acquired businesses. The integration of the international companies we have acquired has resulted in signiﬁcant challenges and costs in the areas of accounting, ﬁnance, operations, IT, strategy and human resources. If an existing or future integration effort is delayed or is not successful we may incur additional costs, the value of our investment in the acquired company may decrease signiﬁcantly and our growth strategy may not be successfully achieved. Any material delays, unexpected costs or other problems encountered in connection with integrating newly acquired businesses could have an adverse effect on our revenues and proﬁtability.

Changes in market conditions and/or relationships with our joint venture partners may require us to revise our strategies, which could adversely affect our results of operation.

Changes in market conditions may lead us to revise the strategies in which businesses were acquired or joint ventures were concluded. Revised strategies may lead us to demerge these businesses or end these joint ventures. The resulting employment reduction and other significant restructuring costs could impact our profitability.

The legal concept of limited liability for loss or damage of goods we carry is increasingly being challenged and this may result in increased exposure to claims.

We transport goods under the conditions of the international conventions in respect of the carriage of goods by air (the Warsaw Convention) and by road (the CMR Conventions). These conventions contain provisions that limit our liability in the event that we lose or damage shipments belonging to our customers. In the past this principle was generally accepted as normal business practice, but in recent years the courts and regulators in an increasing number of jurisdictions are more sympathetic to allegations of “gross negligence” or “lack of due care”, thereby setting aside the principles of limited liability. This trend exposes us to more and increased loss and damage claims. Furthermore, a number of major customers are no longer prepared to accept these established limits of liability and these factors, together with the increased value of the goods we carry, have resulted in a signiﬁcant increase in our ﬁnancial exposure to claims. If this trend continues, it could adversely affect our proﬁtability.

Determination that our subcontractors were to be considered our employees would affect our current business model, causing our operating expenses to rise and our net income to suffer.

In various jurisdictions, we use subcontractors to perform aspects of our business, such as picking-up and delivering parcels, as is common practice in our industry. In certain jurisdictions, the authorities have brought criminal and/or civil actions alleging that our subcontractors or their employees are to be regarded as our own unregistered employees. If these allegations were upheld by a court, we would incur, in addition to criminal ﬁnes, costs such as social security contributions, wage taxes and overtime payments in respect of such employees. Subcontractors could also bring civil actions seeking the recharacterisation of subcontractor relationships in employment contracts. If these actions were successful, our operating expenses would rise and our net income would suffer.

Our ongoing taxation investigations and analyses may end in material additional liabilities that could adversely affect our ﬁnancial position, results and cashﬂows.

In early 2004 our audit committee, on behalf of our Supervisory Board, conducted an independent investigation regarding representations made to the UK tax authorities and to our independent auditors, PricewaterhouseCoopers, with respect to certain UK tax matters originally arising in the late 1990s relating to one of our UK subsidiaries. In August 2004 we submitted a report to the UK tax authorities pursuant to a procedure under UK law designed to ensure full disclosure of all relevant information to the UK tax authorities. In the ﬁrst quarter of 2005 we reached a settlement with the UK tax authorities in relation to those matters without any further negative impact on our tax position in 2005.

As previously disclosed, since August 2004, we have been preparing an addendum to our original report to the UK tax authorities that cover UK tax matters that were not the subject of the original investigation. In 2006 we submitted a substantially advanced draft of available information and related tax conclusions required by the UK tax authorities and started discussions with them on these tax matters.

The major issue being discussed with the UK tax authorities concerns whether some of our non-UK subsidiaries might have been resident in the United Kingdom prior to the acquisition of TNT Limited in December 1996 and, if so, whether capital gains tax would have been due if the tax residency of those subsidiaries later moved to another European country.

After having investigated the matter we are of the opinion that the relevant subsidiaries were never UK resident But even if they were seen to be UK resident, we believe that the imposition of such a capital gains tax would be impermissibly discriminatory under EU law. Our opinion has been and is supported by strong external specialist advice.

We have been in discussion with the UK tax authority to come to an agreement on these issues. While to date no assessments relating to the item under discussion have been raised, the UK tax authority will issue initial assessments, as we understand it, as a matter of procedure, before they and we can effectively continue to seek an agreed solution. TNT will appeal against the initial assessments. The amounts raised in such initial assessments could exceed the realistic range of our estimated total contingent liability as disclosed below. It is customary in the UK with respect to such initial assessments that the actual obligation for payment will be deferred during the litigation and appeal period until either an agreement is reached or a final assessment is raised. On the basis of our ongoing discussions with the UK tax authorities and the strength of our position, we currently expect either these matters to be settled in 2007 or if necessary litigation to be commenced.

We currently believe that it is unlikely that we will incur an additional liability related to the above matters beyond what we have accrued to date.

We disclosed in our 2005 annual report an estimate of a realistic range to reflect our total contingent liability, including potential penalties and interest, of €150 - €550 million, based on a probability-weighted assessment of our estimated total theoretical liability. In April 2006 we disclosed that we reduced the range to €100 - €250 million which we continue to believe to be the realistic range to reflect our contingent liability. This range represents some 25-30% of the non-probability weighted estimated theoretical maximum liability - in the highly unrealistic scenario where all of our tax positions under investigation or analysis were successfully challenged, any expected initial assessments were unsuccessfully challenged by us, we and all relevant tax authorities were unable to reach any settlement whatsoever, and all of our positions were rejected by all relevant courts. We believe this is highly unlikely.

Our estimate involves a series of complex judgments about past and future events and relies on estimates and assumptions. Although we believe that the estimates and assumptions supporting our positions are reasonable and are supported by external advice, our ultimate liability in connection with these matters will depend upon the assessments raised, the result of any negotiations with the relevant tax authorities and the outcome of any related litigation.

If the actual taxes, penalties and interest imposed exceed the amounts we have accrued, it could adversely affect our ﬁnancial position, results and cash ﬂows.

Our restructurings of operations and other measures we take to reduce costs, including forced lay-offs, may not achieve the results we intend and may adversely affect our revenues and proﬁtability.

From time to time we restructure, redesign or integrate various aspects of our operations in an effort to achieve cost savings, ﬂexibility and other efﬁciencies. Our restructuring of operations and other cost reducing measures may not achieve the results we intend and may invoke restructuring and other costs and changes to our business that adversely affect our revenues and proﬁtability. New initiatives as described in our Masterplans may require forced lay-offs. If we are not able to reach agreement with Unions on these Masterplans, our profitability could suffer due to delays in or not reaching planned savings.

A downturn in capital markets may decrease the value of investments made in these markets for our pension schemes and a decline in interest may increase the fair value of our pension liabilities, which in turn could require signiﬁcant additional funding by us.

Our main Dutch deﬁned beneﬁt pension scheme has total assets of over €4 billion, some of which are funded by investments held in equities with a view to beneﬁting from capital appreciation. The value of these securities may be volatile and a downturn in the capital markets could signiﬁcantly reduce the value of these assets. In addition a decline in interest may increase the fair value of our pension liabilities. Should the coverage ratio of assets divided by liabilities fall below the minimum funding requirements prescribed by De Nederlandsche Bank (DNB), into which the Independent Supervisory Authority for Pensions and Insurance was merged during 2004, we will be required to increase our contributions to the funds. If the assets were to lose a substantial amount of their value or if, as a result of a decline in interest, our liabilities would substantially increase, or both, we might be required to make large payments into the funds, which would adversely affect our liquidity over a number of years.

Employee misconduct could result in ﬁnancial losses, the loss of clients and ﬁnes or other sanctions by the governments of the countries in which we do business.

We may be unable to prevent our employees from engaging in misconduct, fraud or other improper activities that could adversely affect our business and reputation. Misconduct could include the failure to comply with applicable law or our business principles, or a breach of conﬁdentiality. The precautions we take to prevent and detect this activity may not be effective. Our investigations of suspected fraudulent activity could expose us to additional sanctions if an investigation is ineffective or hampered by local legal restrictions. As a result of employee misconduct, we could face ﬁnes and penalties imposed by governments in the countries in which we do business. Any such ﬁnes or penalties could lead to adjustments to our ﬁnancial statements and resulting liabilities which could reduce our proﬁtability. In addition, negative publicity in relation to employee misconduct could negatively affect our reputation, harm our ability to recruit employees and managers and reduce our revenues.

Changes in markets and our business plans have resulted and may in the future result in substantial write-downs of the carrying value of our assets, thereby reducing our net income.

Our regular review of the carrying value of our assets (including our intangible, tangible and ﬁnancial ﬁxed assets) has resulted, from time to time, in signiﬁcant impairments, and we may in the future be required to recognise additional impairment charges. Events in the markets where we conduct our businesses, including signiﬁcant declines in stock prices, market capitalisations and credit ratings of market participants, as well as our ongoing review and reﬁnement of our business plans, have resulted and may result in further substantial impairment write-downs of our intangible or other assets at any time in the future.

In addition, we have been and may be required in the future to recognise increased depreciation and amortisation charges if we determine that the useful lives of our ﬁxed assets are shorter than we originally expected. Such changes would have the effect of reducing our net income.

Increased security and anti-terrorism requirements could impose substantial costs on us, especially at TNT Express.

As a result of increased concerns about global terrorism and aviation security, governments and airline operators around the world are adopting or are considering adopting stricter security requirements that will increase operating costs for businesses, including those in the transportation industry. For example, in October 2006 the European Union adopted new rules enhancing many of the security requirements for air cargo on both passenger and all-cargo aircraft. We cannot fully determine the effect that these new rules or changed policies will have on our cost structure or our operating results. It is reasonably possible, however, that these rules or other future security requirements for air cargo carriers could impose material costs on us.

We face risks related to health epidemics and other outbreaks of contagious diseases, including Pandemic Influenza, avian influenza, or avian flu, and SARS.

Our business could be adversely affected by the effects of avian flu, SARS or another epidemic or outbreak. Since 2005 the World Health Organisation and other health monitoring bodies have reported outbreaks of a highly pathogenic avian flu, caused by the H5N1 virus, in certain regions of Asia and Europe. In 2005 and 2006, there have been reports on the occurrences of avian flu in various parts of China, Indonesia, Thailand and other South East Asian countries, including a few confirmed human cases. An outbreak of avian flu in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, particularly in Asia. Additionally, any recurrence of SARS, a highly contagious form of atypical pneumonia, similar to the occurrence in 2003 which affected China, Hong Kong, Taiwan, Singapore, Vietnam and certain other countries, would also have similar adverse effects. These outbreaks of contagious diseases, and other adverse public health developments in China, would have a material adverse effect on our business operations. These could include our ability to ship consignments or otherwise make deliveries of products originating in China, as well as temporary closure of our offices or other facilities. Such closures or travel or shipment restrictions would severely disrupt our business operations and adversely affect our financial condition and results of operations. We have not yet adopted any written preventive measures or contingency plans to combat any future outbreak of avian flu, SARS or any other epidemic.

Our operations and earnings are subject to risks related to the impact of climate change.

We believe that concern about climate change will lead to government action that will require us to further manage emissions from our ground and air fleet. As such, there is a risk to future operations and a compliance risk for existing facilities and our fleet, if we are not able to demonstrate adequate emissions management. Realisation of these risks could have an adverse impact on our operational performance and financial position.