Accounting policies for valuation and determination of result TNT N.V.
The corporate financial statements for the year ended at 31 December 2007 have been prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code. TNT has applied the option in Article 362 (8) to use the same principles of valuation and determination of result for the corporate financial statements as the consolidated financial statements. As a result TNT’s investments in group companies are carried at net asset value. For the principles of valuation of assets and liabilities and for the determination of results reference is made to the notes to the consolidated balance sheet and statements of income.
38 Total financial fixed assets: 4,339 million (2006: 3,733)
| Statement of changes financial fixed assets | Investments in group companies | Investments in associates | Deferred tax assets | Financial fixed assets at fair value | Total |
| Balance at 31 December 2005 | 4,428 | 43 | 5 | 4,476 | |
| Changes in 2006 | |||||
| Results | 736 | (6) | 730 | ||
| Acquisitions/additions | 647 | 19 | 666 | ||
| Disposals/decreases | (2,138) | (2,138) | |||
| Withdrawals/repayments | |||||
| Exchange rate differences | (1) | (1) | |||
| Other changes | |||||
| Total changes | (756) | 13 | (743) | ||
| Balance at 31 December 2006 | 3,672 | 56 | 5 | 3,733 | |
| Changes in 2007 | |||||
| Results | 926 | (5) | 921 | ||
| Acquisitions/additions | 192 | 26 | 15 | 233 | |
| Disposals/decreases | (459) | (4) | (13) | (476) | |
| Withdrawals/repayments | |||||
| Exchange rate differences | (81) | (81) | |||
| Other changes | 9 | 9 | |||
| Total changes | 578 | 21 | (4) | 11 | 606 |
| Balance at 31 December 2007 | 4,250 | 77 | 1 | 11 | 4,339 |
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39 Pension asset: 631 million (2006: 495)
TNT N.V. is the sponsoring employer for two Dutch pension plans, which are externally funded and are covering the majority of TNT’s employees in the Netherlands. In accordance with IAS19.34a the net defined benefit cost is recognised in the corporate financial statements of TNT N.V. the other group companies recognise the costs equal to the contribution payable for the period in their financial statements. For TNT N.V. the contributions received from other group entities offset the pension expense. The impact of the contributions is represented as participant contributions in the table below, which also reconciles the opening and closing balances of the present value of the defined benefit obligation and the fair value of plan assets for the TNT N.V. sponsored group pension plans. For additional details on the Dutch pension plans, see note 10.
| 2007 | 2006 | |
| CHANGE IN BENEFIT OBLIGATION | ||
| Benefit obligation at beginning of year | (4,468) | (4,502) |
| Service costs | (119) | (137) |
| Interest costs | (214) | (198) |
| Amendments | 0 | 8 |
| Prior service costs/termination benefit costs | 0 | 0 |
| Curtailments/settlements | 0 | 9 |
| Actuarial (loss)/gain | 701 | 271 |
| Benefits paid | 90 | 81 |
| Benefit obligation at end of year | (4,010) | (4,468) |
| CHANGE IN PLAN ASSETS | ||
| Fair value of plan assets at beginning of year | 4,602 | 4,179 |
| Actual return on plan assets | 104 | 382 |
| Participant contributions | 105 | 122 |
| Benefits paid | (90) | (81) |
| Fair value of plan assets at end of year | 4,721 | 4,602 |
| FUNDED STATUS AS PER 31 DECEMBER | ||
| Funded status | 711 | 134 |
| Unrecognised net actuarial loss | (114) | 322 |
| Unrecognised prior service costs | 34 | 39 |
| Pension assets | 631 | 495 |
| COMPONENTS OF EMPLOYER PENSION EXPENSE | ||
| Service costs | (119) | (137) |
| Interest costs | (214) | (198) |
| Expected return on plan assets | 369 | 342 |
| Amortisation of actuarial loss | (1) | (24) |
| Curtailment gain | 0 | 8 |
| Other costs | (3) | (1) |
| Participant contributions | 105 | 122 |
| Total post employment benefit income/(expenses) | 137 | 112 |
| WEIGHTED AVERAGE ASSUMPTIONS AS AT 31 DECEMBER | ||
| Discount rate | 5.7% | 4.7% |
| Expected return on plan assets | 7.9% | 7.9% |
| Rate of compensation increase | 2.0% | 2.0% |
| Rate of benefit increase | 2.0% | 2.0% |
|
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40 Equity: 1,931 million (2006: 1,983)
| Issued share capital | Additional paid in capital | Translation reserve | Hedging reserve | Other reserves | Retained earnings | Total shareholders' equity | |
| Balance at 31 December 2005 | 230 | 1,421 | (16) | (12) | 1,080 | 559 | 3,262 |
| Profit for the period | 670 | 670 | |||||
| Gains/(losses) on cashflow hedges, net of tax | (9) | (9) | |||||
| Currency translation adjustment | (1) | (1) | |||||
| Total recognised income for the year | (1) | (9) | 670 | 660 | |||
| Final dividend previous year | (173) | (173) | |||||
| Appropriation of net income | 386 | (386) | 0 | ||||
| Interim dividend current year | (109) | (109) | |||||
| Repurchases of shares / cancellation | (27) | (176) | (1,533) | (1,736) | |||
| Share based compensation | 13 | 13 | |||||
| Other | 12 | 54 | 66 | ||||
| Total direct changes in equity | (27) | (176) | 12 | (1,080) | (668) | (1,939) | |
| Balance at 31 December 2006 | 203 | 1,245 | (5) | (21) | 561 | 1,983 | |
| Profit for the period | 986 | 986 | |||||
| Gains/(losses) on cashflow hedges, net of tax | (1) | (1) | |||||
| Currency translation adjustment | (81) | (81) | |||||
| Total recognised income for the year | (81) | (1) | 986 | 904 | |||
| Final dividend previous year | (183) | (183) | |||||
| Appropriation of net income | 378 | (378) | 0 | ||||
| Interim dividend current year | (115) | (115) | |||||
| Repurchases of shares / cancellation | (21) | (263) | (423) | (707) | |||
| Share based compensation | 14 | 14 | |||||
| Other | 4 | 31 | 35 | ||||
| Total direct changes in equity | (21) | (263) | 4 | (676) | (956) | ||
| Balance at 31 December 2007 | 182 | 982 | (82) | (22) | 871 | 1,931 | |
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The translation and hedging reserves are legal reserves. The total amount of these legal reserves amount to -€104 million (2006: 26) which limits the dividend distribution for this amount. For additional details on equity, see note 9.
41 Other current liabilities
The other current liabilities of €671 million as of 31 December 2007 include the nominal value of the 5.125% Eurobond of €637 million, see note 13 and 31.
42 Wages and salaries
(No corresponding financial statement number)
TNT N.V. does not have any employees. Hence no salary and social security costs were incurred. In accordance with IAS19.34 the net defined benefit cost shall be recognised in the corporate financial statements of TNT N.V., for further information on pension costs see note 39.
43 Commitments not included in the balance sheet
(No corresponding financial statement number)
Declaration of joint and several liability
As at 31 December 2007 TNT N.V. has issued a declaration of joint and several liability for some of its group companies in compliance with article 403, Book 2 of the Dutch Civil Code.
Those group companies are:
- Koninklijke TNT Post B.V.
- TNT Holdings B.V.
- TNT Express Holdings B.V.
- TNT Head Office B.V.
Fiscal unity in the Netherlands
TNT N.V. forms a fiscal unity with several Dutch entities for corporate income tax and VAT purposes. The full list of Dutch entities which are part of the fiscal unity is included in the list containing the information referred to in article 379 and article 414, Book 2 of the Dutch Civil Code, which is filed at the office of the Chamber of Commerce in Amsterdam. A company and its subsidiaries that form part of the respective fiscal unities are jointly and severally liable for taxation payable by these fiscal unities.
Guarantees
Parental support in the form of a guarantee has been provided by TNT N.V. relating to its subsidiary TNT Finance B.V. for a syndicated loan (€1,000 million), various loan facilities including a €1,000 million commercial paper programme, €175 million cash pooling credit facility and for various international swaps and derivatives association (ISDA) agreements.
TNT N.V. issued corporate guarantees for two of its subsidiaries amounting to €34 million.
A further guarantee of €20 million was issued for a credit facility of TNT China Holdings Co. LTD., which is an indirect subsidiary of the company.
Parental support in the form of a letter of guarantee and a subscription letter has been provided by TNT Holdings B.V. to its indirect subsidiary TNT Pty. Ltd. in relation to a capital reduction of TNT Pty. Ltd. in 1999.
Parental support in the form of an indemnity has been provided by TNT N.V. to its indirect subsidiary TNT Holdings (UK) Ltd. and its subsidiaries in connection with the acquisition of TNT PTY Ltd. in 1996 and the financing of this acquisition and as a result of the restructuring of the group in the course of 1997 as a direct consequence of this acquisition.
44 Subsidiaries and associated companies at 31 December 2007
(No corresponding financial statement number)
The full list containing the information referred to in article 379 and article 414, Book 2 of the Dutch Civil Code is filed at the office of the Chamber of Commerce in Amsterdam.
Amsterdam, 18 February 2008
Board of Management
- M.P. Bakker (Chairman)
- C.H. Van Dalen
- H.M. Koorstra
- M.C. Lombard
Supervisory Board
- J.H.M. Hommen (Chairman)
- R.J.N. Abrahamsen
- M. Harris
- R. Dahan
- V. Halberstadt
- G. Kampouri Monnas
- R. King
- W. Kok
- S. Levy
- R.W.H. Stomberg
TNT N.V.
Neptunusstraat 41-63
2132 JA Hoofddorp
P.O. Box 13000
1100 KG Amsterdam
The Netherlands
45 Other information
To the General Meeting of Shareholders of TNT N.V.
Auditor’s report
Report on the financial statements
We have audited the financial statements over 2007 of TNT N.V., Amsterdam, set out on pages 62 - 124. These financial statements consist of the consolidated financial statements and the corporate financial statements. The consolidated financial statements comprise the consolidated balance sheet as at 31 December 2007, consolidated statement of income, consolidated cash flow statement and consolidated statement of changes in total equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. The corporate financial statements comprise the corporate balance sheet as at 31 December 2007, the corporate statement of income for the year then ended and the notes.
Board of Management’s responsibility
The Board of Management of the company is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the Report of the Board of Management set out on pages 6 - 37 and pages 42 - 53 in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion with respect to the consolidated financial statements
In our opinion, the consolidated financial statements, set out on pages 62 - 119, give a true and fair view of the financial position of TNT N.V. as at 31 December 2007, and of its result and its cash flow for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code.
Opinion with respect to the corporate financial statements
In our opinion, the corporate financial statements, set out on pages 120 - 124, give a true and fair view of the financial position of TNT N.V. as at 31 December 2007, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirement under 2:393 sub 5 part e of the Netherlands Civil Code, we report, to the extent of our competence, that the report of the Board of Management set out on pages 6 - 37 and pages 42 - 53, is consistent with the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code.
Amsterdam, 18 February 2008
PricewaterhouseCoopers Accountants N.V.
Originally signed by drs. M. de Ridder RA
Extract from the articles of association on appropriation of profit
Under TNT’s current articles of association, the dividend specified in article 35, paragraph 1 will be paid on the preference shares B if outstanding. Subject to the approval of TNT’s Supervisory Board, the Board of Management will determine which part of the profit remaining after payment of dividend on any preference shares B will be appropriated to the reserves (article 35, paragraph 2). The remaining profit after the appropriation to reserves shall be at the disposal of the general meeting of shareholders (articles 35, paragraph 3). No dividends shall be paid on shares held by TNT in its own capital (article 35, paragraph 6).
Preference shares B have not been issued.
Appropriation of profit
Subject to the adoption of TNT’s financial statements by the annual general meeting of shareholders, the proposed 2007 dividend has been set at €0.85 in cash per ordinary share of €0.48 par value. After adjusting for the interim dividend of €0.30 per ordinary share paid out in August 2007, the final dividend will be €0.55 per ordinary share.
| Appropriation of profit | 2007 |
| Profit attributable to the shareholders | 986 |
| Appropriation in accordance with the articles of association: | |
| Reserves adopted by the Board of Management and approved by the Supervisory Board (article 35, par.2) | (670) |
| Dividend on ordinary shares | 316 |
| Interim dividend paid | 115 |
| Final dividend | 201 |
|
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Special control rights under the articles of association
On 17 November 2006, the State of the Netherlands transferred the special share in the company to TNT for free. As part of that transaction TNT agreed not to exercise the rights attached to this special share or transfer this share to a third party pending conversion of the special share into an ordinary share. The special share was converted into an ordinary share as part of an amendment to the articles of association. As a result the special share ceased to exist on 27 April 2007, the date on which the amendment of the articles of association became effective.
Group companies of TNT N.V.
The list containing the information referred to in article 379 and article 414 of Book 2 of the Dutch Civil Code is filed at the office of the Chamber of Commerce in Amsterdam.
Subsequent events
For information relating to subsequent events, see note 36.