16 Net sales: 10,885 million (2006: 9,948)

The net sales of Mail, Express and Other networks relate to the trading activities of these reporting segments, arising from rendering services. Net sales allocated by geographical area in the country or region in which the entity records sales is detailed in note 35.

17 Other operating revenues: 132 million (2006: 112)

Other operating revenues relate to the sale of goods and rendering of services not related to TNT’s normal trading activities and mainly include passenger/ charter revenues €75 million (2006: 55), customs clearance/ administration revenue €33 million (2006: 16), rental income of temporarily leased-out property €4 million (2006: 4) and catering services €2 million (2006: 6).

18 Other income: 75 million (2006: 65)

Other income in 2007 mainly includes net proceeds from the sale of property, plant and equipment for €62 million (2006: 37) and the sale of group companies of €3 million (2006: 24) and other income of €10 million (2006: 4).

19 Salaries, pensions and social security contributions: 3,608 million (2006: 3,384)

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Year ended at 31 December 2007 2006
Salaries 3,071 2,823
Share based payments 13 9
Pension charges:
Defined benefit plans 45 120
Defined contribution plans 36 35
Social security charges 443 397
Total 3,608 3,384
  • (in € millions)

The increase in the salaries mainly relates to the increase of the labour force and the restructuring costs of €110 million of Mail Netherlands.

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Labour force 2007 2006 1
Employees 2
Express 75,032 52,638
Mail 84,929 84,731
Other networks 1,385 1,422
Non-allocated 236 431
Total at year end 161,582 139,222
Employees of joint ventures 3 4,621 6,691
Number of external agency staff at year end 38,639 38,546
Full-time equivalents (FTEs) 2
Express 70,271 48,652
Mail 42,777 42,691
Other networks 1,182 1,206
Non-allocated 229 424
Total year average 114,459 92,973
FTEs of joint ventures 2,3 4,000 5,368
  • 1 – Comparative figures of Express and Other networks are adjusted
  • 2 – Including temporary employees on our payroll.
  • 3 – These numbers represent all employees and FTEs in the joint ventures.

At the end of 2007, 4,621 people (2006: 6,691) were employed by joint ventures, of whom 2,674 (2006: 4,824) were on the payroll of Dutch companies, primarily Postkantoren B.V. and 1,947 (2006: 1,867) were on the payroll of companies outside the Netherlands.

Apart from the headcount of employees the labour force is also expressed in full-time equivalents (FTE’s) based on the hours worked divided by the local standard. In 2007 the average number of FTE’s in the Mail division was 42,777. The expansion of European Mail Networks mainly in Germany and the UK resulted in an increase of around 1,240 FTE’s which was partly offset by the decrease in Mail Netherlands of around 1,135 FTE’s resulting from efficiency initiatives.

The average number of FTE’s in the Express division as at 31 December 2007 was 70,271 being an increase of 44.4% compared to 2006. This is mainly due to the new acquisitions of Hoau and Mercúrio in 2007.

Remuneration of members of the Supervisory Board

Over 2007, the accrued remuneration of the current members of the Supervisory Board, excluding VAT, amounted to €561,063 (2006: 556,000). The remuneration of the individual members of the Supervisory Board is set out in the table below:

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Supervisory Board compensation Base compensation Other payments 1 Total renumeration
J.H.M. Hommen 60,000 23,000 83,000
R.J.N. Abrahamsen 45,000 8,500 53,500
J.M.T. Cochrane 2 25,714 2,000 27,714
R. Dahan 45,000 7,500 52,500
V. Halberstadt 45,000 11,500 56,500
M. Harris 3 22,500 4,500 27,000
G. Kampouri Monnas 45,000 10,000 55,000
R. King 45,000 5,000 50,000
W. Kok 45,000 9,500 54,500
S. Levy 45,000 7,500 52,500
R.W.H. Stomberg 45,000 7,000 52,000
Total 468,214 96,000 564,214
  • (in €)
  • 1 – Payments relating to number of Supervisory Board committee meetings attended.
  • 2 – J.M.T. Cochrane resigned on 26 July 2007
  • 3 – M.Harris was appointed on 20 April 2007

No options or shares were granted to members of the Supervisory Board and none of the members of the Supervisory Board accrued any pension rights with the company.

Remuneration of members of the Board of Management

In 2007 the total remuneration of the Board of Management consisted of:

  • base salary
    • accrued short term incentive
    • accrued long term incentive
  • other periodic paid compensation
    • accrued short term incentive
    • accrued long term incentive
  • variable compensation:
    • accrued short term incentive
    • accrued long term incentive
  • pension

In the paragraphs below the 2007 values of each of these remuneration elements will be reported per member of the Board of Management.

Total remuneration

In 2007, the remuneration, including pension and social security contributions, of the current members of the Board of Management amounted to €9,198,005 (2006: 7,181,572). Included in this amount is an amount of €970,551 which represents the cost of the waived portion of the granted performance shares which under IFRS 2 Share-based payment qualify as an accelerated vesting for which the amount that otherwise would have been recognised for services received over the remainder of the vesting period, is recognised immediately.

The remuneration of the individual members of the Board of Management is set out in the tables below:

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Remuneration Board of Management Base salary Other periodic paid compensation 1 Accrued short term incentive Accrued long term incentive (excluding waiver) Pension related costs Total 2007 (excluding waiver)
Peter Bakker 900,000 119,858 770,876 438,235 125,883 2,354,852
Henk van Dalen 2 600,000 530,227 462,134 128,195 403,324 2,123,880
Harry Koorstra 600,000 107,503 519,891 221,197 117,865 1,566,456
Marie-Christine Lombard 600,000 471,840 511,327 323,099 276,000 2,182,266
Total 2,700,000 1,229,428 2,264,228 1,110,726 923,072 8,227,454
  • (in €)
  • 1 – Includes company costs related to tax and social security, company car and other costs. It also includes annual salary allowances made as compensation for the change in pension system to Peter Bakker of €56,000; Harry Koorstra of €51,000 and Henk van Dalen of €51,000.
  • 2 – Employed as per 1 April 2006; The other paid compensation include the second instalment of €325,000 of the total compensation of €1,300,000 for the loss of long term incentive rights at his former employer. The pension related costs include the second instalment of the actuarial value of a total compensation of €1,350,000 to be equally contributed in four instalments in accordance with the employment agreement of Henk van Dalen.
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Base salary
Remuneration Board of Management Total 2007 (excluding waiver) Waiver of granted shares 2007 Total 2007 (including waiver) Total 2006
Peter Bakker 2,354,852 358,617 2,713,469 2,177,624
Henk van Dalen 2,123,880 203,978 2,327,858 1,544,919
Harry Koorstra 1,566,456 203,978 1,770,434 1,450,604
Marie-Christine Lombard 2,182,266 203,978 2,386,244 2,008,425
Total 8,227,454 970,551 9,198,005 7,181,572
  • (in €)

Base salary for the members of the Board of Management has been unchanged since 2004 and amounted to €900,000 for the CEO and €600,000 for the Board members. To underline its understanding of the measures requested from employees in connection with further planned cost reductions at TNT Post Netherlands, the Board of Management decided not to accept a proposed 5% increase of the base salary as of 1 January 2007.

Variable compensation

In the table below the total variable compensation in 2007 excluding the waived portion of the granted 2007 performance shares to the members of the Board of Management is expressed as a percentage of base salary.

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Percentage variable compensation Board of Management Accrued short term incentive Accrued long term incentive (excluding waiver) Total variable compensation as % of base pay
Peter Bakker 770,876 438,235 1,209,111 134%
Henk van Dalen 462,134 128,195 590,329 98%
Harry Koorstra 519,891 221,197 741,088 124%
Marie-Christine Lombard 511,327 323,099 834,426 139%
Total 2,264,228 1,110,726 3,374,954
  • (in €, except percentages)
Accrued short term incentive

Since 2002, TNT accounts for bonus payments on the basis of the accrued bonuses for the performance of the year reported. In 2007, an amount of €1,953,000 was paid to the members of the Board of Management for performance over 2006.

In 2007, both Express and Mail exceeded their economic profit targets. In 2007 the performance on earnings from continuing operations also exceeded the set target. The bonus paid out to the members of the Board is paid out in cash. Under the bonus matching plan they can invest 25% of the gross bonus amount in shares, see also below the paragraph “share matching plan”.

In the table below the amount of €2,025,000 reflects the accrued bonuses for performance over 2007 and the amount of €239,228 reflects the accrued costs for the rights on matching shares that were granted in 2007, 2006, 2005 and 2004. The costs for the rights on matching shares related to the matching shares granted in 2007 for the performance over 2006, amounted for Peter Bakker to €21,668, for Harry Koorstra and Marie-Christine Lombard €14,445 and for Henk van Dalen €12,134. The costs are determined by multiplying the number of matching shares with the share price on the date of grant corrected for the expected dividend yield during the vesting period and taking into account statistical evidence of non-market conditions which value then subsequently is amortised over the vesting period.

The 2007 accrued short term incentive amounts for the members of the Board of Management are accrued as set out below:

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Accrued short term Incentive Board of Management Accrued for 2007 performance 1 as % of base pay Accrued for matching shares 2 Accrued for short term incentive as % of base pay
Peter Bakker 675,000 75% 95,876 770,876 86%
Henk van Dalen 450,000 75% 12,134 462,134 77%
Harry Koorstra 450,000 75% 69,891 519,891 87%
Marie-Christine Lombard 450,000 75% 61,327 511,327 85%
Total 2,025,000 239,228 2,264,228
  • (in €, except percentages)
  • 1 – The level of short term incentive is maintained at policy level but the actual pay-out is capped at last years’ level.
  • 2 – Includes costs for matching shares granted in 2007 and previous years.
Share matching plan

In 2007, the short term incentive related to the realisation of targets over 2006 for the Board of Management amounted to €1,953,000 (2006: 1,772,279). This amount (€1,953,000) was paid in cash, taking into account applicable taxes and social security contributions. Of the net amount received, an amount equal to 25% of the gross bonus (€488,250) was used by the Board members to purchase TNT-shares. The number of purchased shares involved is calculated by dividing the amount invested by the share price on the day of grant. The day of grant is the day following the announcement of the first quarter results. If at least 50% of the shares are retained for a period of three years, the company will match the amount of these shares on a one-to-one basis. In compliance with the Dutch corporate governance code, the members of the Board of Management may not sell their matching shares before the earlier of five years from the date of grant or the end of the employment, although any sale of shares for the purpose of using the proceeds to pay for the tax relating to the grant of these shares is exempted. These bonus shares are held in a trust by TNT’s share administrator.

The current matching entitlement is set out in the following table:

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Bonus-related matching rights Board of Management Number of matching rights on shares Remaining years in contractual life
Year Outstanding 1 Jan 2007 Granted during 2007 Vested during 2007 Forfeited during 2007 Outstanding 31 Dec 2007
Peter Bakker 2005 8,211 8,211 0.3
2006 4,159 4,159 1.3
2007 5,213 5,213 2.3
Henk van Dalen 2007 2,919 2,919 2.3
Harry Koorstra 2004 2,602 2,602
2005 5,474 5,474 0.3
2006 3,043 3,043 1.3
2007 3,476 3,476 2.3
Marie-Christine Lombard 2005 4,562 4,562 0.3
2006 3,043 3,043 1.3
2007 3,476 3,476 2.3
Total 31,094 15,084 2,602 0 43,576

In 2007, the average price on vesting for matching shares was €32.38.

Accrued long term incentive

The maximum numbers of options that can vest are disclosed in this report and amount to 150% of base allocation of share options for 2004. The maximum number of performance shares that can vest are disclosed in this report and amount to 120% of base allocation of performance shares granted in 2004, 2005 and 2006 and to 150% of base allocation of performance shares granted in 2007. In the table below the total costs of the total share options and rights on performance shares excluding the waived portion of the granted 2007 performance shares granted to the members of the Board of Management are expressed as a percentage of base salary.

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Accrued long term incentive Board of Management Share options granted in 2004 Rights on performance shares granted in 2004-2007 1 Accrued long term incentive (excluding waiver) as % of base pay
Peter Bakker 25,810 412,425 438,235 49%
Henk van Dalen 128,195 128,195 21%
Harry Koorstra 12,905 208,292 221,197 37%
Marie-Christine Lombard 12,905 310,194 323,099 54%
Total 51,620 1,059,106 1,110,726
  • (in €, except percentages)
  • 1 – Excluding the waived portion of the granted shares.

The costs of the granted performance shares in 2007 excluding the waived portion of the granted performance shares amounted for Peter Bakker to €88,871, for Henk van Dalen, Harry Koorstra and for Marie-Christine Lombard to €46,511. The cost are determined by multiplying the number of granted performance shares with the fair value of such shares on the date of grant calculated by using the Monte Carlo model and taking into account statistical evidence of non-market conditions which value then subsequently is amortised over the vesting period.

Vesting of the long term incentive

The vesting of the number of share options and the performance shares depends on the company’s performance on total shareholder return. TNT’s relative total shareholder return over the period from 1 January 2005 through 31 December 2007 governs the vesting of performance share grant of 2005. TNT’s relative total shareholder return over the period from 4 May 2006 through 3 May 2009 governs the vesting of the performance share grant of 2006. TNT’s relative total shareholder return over the period from 4 May 2007 through 3 May 2010 governs the vesting of the performance share grant of 2007.

Based on the total shareholder return vesting percentages, the next table shows the pro forma vesting of the unvested performance shares, as if the performance period ended at 31 December 2007.

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Performance shares
Pro forma vesting according to TSR performance schedules Year 1 Vesting % of base allocation Vesting as per 31 Dec 2007
Peter Bakker 2005 75% 29,094
2006 75% 20,039
2007 52% 12,922
Henk van Dalen 2006 75% 10,020
2007 52% 6,763
Harry Koorstra 2005 75% 14,547
2006 75% 10,020
2007 52% 6,763
Marie-Christine Lombard 2005 75% 14,547
2006 75% 22,520
2007 52% 6,763
Total 153,998
  • 1 – For 2005 total shareholder return is fixed, vesting will take place in 2008.
Long term incentive/performance share plan

The table below summarises the status of the rights granted under the performance share plan to the members of the Board of Management:

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Rights on performance shares Board of Management Number of rights on performance shares Remaining years in contractual life
Year Outstanding 1 Jan 2007 Granted during 2007 Vested during 2007 Forfeited / waived 1 during 2007 Outstanding 31 Dec 2007
Peter Bakker 2004 10,846 10,846
2005 46,550 17,456 29,094 0.3
2006 32,062 32,062 1.3
2007 62,344 25,069 37,275 2.3
Henk van Dalen 2006 16,032 16,032 1.3
2007 33,767 14,259 19,508 2.3
Harry Koorstra 2004 5,423 5,423
2005 23,275 8,728 14,547 0.3
2006 16,032 16,032 1.3
2007 33,767 14,259 19,508 2.3
Marie-Christine Lombard 2004 5,423 5,423
2005 23,275 8,728 14,547 0.3
2006 36,032 36,032 1.5
2007 33,767 14,259 19,508 2.3
Total 214,950 163,645 21,692 102,758 254,145
  • 1 – For the grant year 2007 these represent the waived portion of the granted rights, respectively Peter Bakker for 25,069 shares and the other board members for 14,259 each.

In 2007 the average price on vesting for performance shares for the members of the Board of Management was €32.38.

Long term incentive/share option plan

The table below summarises the status of the number of outstanding options of TNT’s ordinary shares granted to the Board of Management.

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Number of options Amounts in €
Options Board of Management Year Outstanding 1 Jan 2007 Exercised during 2007 Forfeited during 2007 Outstanding 31 Dec 2007 Exercise price Share price on exercise date Remaining years in contractual life
Peter Bakker 2004 60,000 60,000 18.44 31.37
Harry Koorstra 2004 30,000 30,000 18.44 32.34
Marie-Christine Lombard 2004 30,000 30,000 18.44 4.3
Total current members 120,000 90,000 30,000
Dave Kulik 2003 9,000 9,000 13.85 33.83
2004 30,000 30,000 18.44 33.82
Total former members 39,000 39,000
Total 159,000 129,000 30,000
Pensions

Peter Bakker, Harry Koorstra and Henk van Dalen are participants in a defined benefit scheme, which provides an annual benefit of 70% of pensionable salary, assuming 35 years of service. Marie-Christine Lombard participates in a defined contribution pension scheme. The pensionable age of all members of the Board of Management is 65 years.

Performance share plan management

The performance share scheme is an equity-settled plan with annual grants. Participants will be granted a conditional right over a number of TNT shares. The number of shares comprised in the share award reflects the position that the participant holds and management’s assessment of their future contribution to the company.

Participants will become owner of the shares after a period of three years (vesting period). The plan includes market based vesting conditions such that the number of shares is dependent on TNT’s Total Shareholder Return (TSR) performance relative to certain other stock indices. These conditions are included in the calculation of the fair value at grant date. This plan is similar to the stock option plan as described below with the only difference that the exercise price of performance shares is equal to zero.

  • Performance shares were granted in May 2007 to about 773 TNT managers at a fair value of €17.03. These grants were part of the policy of granting rights on performance shares each year to eligible members of senior management from 2005 onwards.
  • Shares will become unconditional after the third anniversary of the grant.
  • The participant retains the right to be compensated when he/she leaves the company for certain reasons (retirement, certain reorganisations, disability or death).

The total number of rights on performance shares for management granted in 2007 is stated below.

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Rights on performance shares management Number of rights on performance shares Remaining years in contractual life
Year Outstanding 1 Jan 2007 Granted during 2007 Vested during 2007 Forfeited during 2007 Outstanding 31 Dec 2007
Management 2005 777,530 25,640 305,885 446,005 0.3
2006 593,608 11,903 49,560 532,145 1.3
2007 1,060,356 298 16,854 1,043,204 2.3
Total 1,371,138 1,060,356 37,841 372,299 2,021,354

In 2007 the average price on vesting for performance shares for the management was €32.11.

Option plan management

No options were granted in 2007. In 2005 the option plan was replaced by the performance share scheme.

The number of options granted in each of the three years that will ultimately be eligible for exercise is dependent on TNT’s total shareholder return relative to a peer group of direct competitors and a peer group of AEX companies.

Option rights were granted in accordance with the management option plan, which is approved by the Supervisory Board. This plan sets out the procedures for share option grants in more than 40 countries around the world.

The significant aspects of the plan are:

  • options are granted at the average market price as traded on the Euronext Amsterdam on the date the grant is made (2004: €18.44/share),
  • for options granted in 2003 and 2004 the option is exercisable between the third and eighth anniversary of the day of grant; after eight years the outstanding options are forfeited,
  • for options granted prior to 2003 the option is exercisable between the third and fifth anniversary of the day of grant; after five years the outstanding options are forfeited,
  • the option holder retains the right to exercise his/her option when he/she leaves the company for certain reasons (retirement, certain reorganisations, disability or death), and
  • the option holder loses the right to exercise his/her option when he/she leaves the company for reasons other than those mentioned above.

The exercise of options is subject to the TNT rules concerning Inside information.

Statements of changes of outstanding options

The table below includes the outstanding options of the Board of Management and former members of the Board of Management, as well as eligible members of senior managers in the current TNT group. All options granted entitle the holder of the allotment of ordinary shares when they are exercised and are equity settled.

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Statement of changes of outstanding options Number of options Amounts in € Remaining years in contractual life
Year Outstanding 1 Jan 2007 Exercised during 2007 Forfeited during 2007 Outstanding 31 Dec 2007 Exercise price Share price on exercise date
Board of Management various 159,000 129,000 30,000
Management 2002 51,879 17,593 34,286 22.24 34.34
2003 163,527 83,793 150 79,584 13.85 32.64 3.1
2003 6,300 3,300 3,000 14.51 34.16 3.4
2004 1,282,536 934,163 7,344 341,029 18.44 32.18 4.3
Total 1,663,242 1,167,849 41,780 453,613
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Historic overview outstanding options 2007 2006
Number of options Weighted average exercise price (in €) Number of options Weighted average exercise price (in €)
Balance at beginning of year 1,663,242 18.08 7,296,048 17.63
Discontinued operations (1,747,868) 17.77
Exercised (1,167,849) 32.27 (1,825,112) 27.37
Forfeited (41,780) 21.54 (2,059,826) 16.38
Balance at end of year 453,613 17.61 1,663,242 18.08
Exercisable at 31 December 453,613 17.61 225,456 15.80
Bonus/matching plan for senior management

Members of a selected group of managers may on a voluntary basis, participate in the bonus matching plan. In such case, they are paid 100% of their 2003, 2004, 2005, 2006 and 2007 bonus in cash and can convert 25% as a grant of TNT shares with an associated matching right in 2007 (75,498), 2006 (67,107), 2005 (121,345), 2004 (107,710) and in 2003 (54,405) if at least 50% of the shares are kept for three years. The company sees the bonus/matching plan as part of the remuneration package for the members of its top management, and it is particularly aimed at further aligning their interests with the interests of the shareholders. The rights on bonus and matching shares are granted in accordance with the bonus/matching plan, which has been approved by the Supervisory Board.

The significant aspects of the plan are:

  • the grant of the right on bonus shares is in lieu of 25% of an individual’s annual bonus payment, and bonus shares are delivered shortly after the right is granted,
  • the number of bonus shares is calculated by dividing 25% of an individual’s gross annual bonus relating to the preceding financial year by the share price on the Euronext Amsterdam on the date the grant is made (2007: €32.37/share),
  • the rights on matching shares are granted for zero costs and the number of shares is equal to the number of bonus shares,
  • the matching shares are delivered three years after the delivery of the bonus shares. One matching share is delivered for each bonus share that has been retained for three years,
  • for each bonus share that is sold within three years, the associated right to one matching share lapses. If more than 50% of the bonus shares are sold within three years, the entire right to matching shares lapses with immediate effect,
  • where a participant leaves the company for certain reasons (retirement, certain reorganisations, disability or death) the right to matching shares will vest immediately and he/she can exercise his/her right pro rata, and
  • a participant loses the right to exercise his/her right on matching shares when he/she leaves the company for reasons other than those mentioned above,

The exercise of the rights on matching shares is subject to the TNT rules concerning Inside information that apply to TNT’s company. All awards under this plan are equity settled.

The table below summarises the status of the number of outstanding rights on matching shares granted to senior managers in the current TNT group:

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Bonus connecting matching rights Management Number of matching rights on shares Remaining years in contractual life
Year Outstanding 1 Jan 2007 Granted during 2007 Vested or forfeited during 2007 Outstanding 31 Dec 2007
Management 2004 73,271 73,271
2005 86,776 5,550 81,226 0.3
2006 65,896 3,559 62,337 1.3
2007 75,498 2,170 73,328 2.3
Total 225,943 75,498 84,550 216,891

In 2007 the average price on vesting for matching shares for the management was €33.15.

Fair value assumptions and hedging

TNT’s share based plans have been measured using the Monte Carlo fair value measurement method. Significant assumptions used in TNT’s calculations are as follows:

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2007 2006 2005
Share price (in €) 32.28 30.05 20.71
Volatility (%) 19.30 20.89 28.35
Vesting period (in years) 3 3 3
Risk free rate (%) 4.33 3.60 2.39
Dividend yield (%) 2.48 2.29 3.13

As of 4 May 2007, the 2007 grant date, the fair value of the matching shares awarded was €29.88 and the fair value of the performance shares awarded was €17.03.

As of 5 May 2006, the 2006 grant date, the fair value of the matching shares awarded was €28.13 and the fair value of the performance shares awarded was €18.64. As of 27 April 2005, the 2005 grant date, the fair value of the matching shares was €18.62 and of TNT’s performance shares awarded was €14.11.

TNT manages its risk in connection with the obligations the company has under the existing share and option plans by purchasing shares in the market. In 2007, TNT purchased no shares for hedging purposes.

At 31 December 2007, TNT held a total of 1,716,060 shares to cover share and options schemes (2006: 2,884,441).

20 Depreciation, amortisation and impairments: 349 million (2006: 318)

Impairment costs for property, plant and equipment of €5 million (2006: 5) are included in the depreciation expense. The impairment charges relate to the assets of the UK Parcel contract in the Mail division.

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Year ended at 31 December 2007 2006
Amortisation of other intangibles 73 63
Depreciation and impairment property, plant and equipment 276 255
Total 349 318
  • (in € millions)

21 Other operating expense: 714 million (2006: 578)

The other operating expenses largely relate to Express for €320 million (2006: 274) and Mail for €373 million (2006: 291). The other operating expenses consist of IT communication, office cost, travel and training expense, consulting and other shared services cost.

Included within other operating expenses are costs incurred for services provided by TNT’s group statutory auditors, PricewaterhouseCoopers Accountants N.V.

In 2006 approximately €7 million was related to discontinued business.

In 2007, fees for audit services included the audit of TNT’s annual financial statements, procedures on internal controls and the review of interim financial statements, statutory audits, services associated with issuing an audit opinion on the postal concession reporting and services that only the auditor can reasonably provide. Fees for audit related services include employee benefit plan audits, due diligence related to mergers and acquisitions, internal control reviews, consultation concerning financial accounting and reporting matters not classified as audit. Fees for tax services include tax compliance, tax advice, including all services performed by the auditor’s professional staff in its tax division, except those rendered in connection with the audit. Fees for other services include financial risk management reviews and audit of corporate sustainability reports.

The fees can be divided into the following categories:

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Year ended at 31 December 2007 2006
Audit fees 9 14
Audit related fees 3 9
Tax advisory costs 0 0
Other fees 1 0
Total 13 23
  • (in € millions)

22 Net financial income and expenses: -94 million (2006: -47)

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Year ended at 31 December 2007 2006
Interest and similar income 85 188
Fair value change fair value hedges 3 11
Fair value change of financial assets through profit and loss 9
Total interest and similar income 97 199
Interest and similar expenses (184) (235)
Fair value change cashflow hedge recycled to profit and loss (1)
Fair value change fair value hedges (3) (11)
Net foreign exchange losses (3)
Total interest and similar expenses (191) (246)
Net financal expenses (94) (47)
  • (in € millions)
Interest and similar income

Interest and similar income in 2007 of €97 million (2006: 199) mainly relates to interest income on banks, loans and deposits of €69 million (2006: 109) of which €58 million (2006: 93) relates to a gross up of interest on cash pools (fully offset by an equal amount in interest expenses), interest on taxes of €5 million (2006: 1) and interest on foreign currency hedges of €5 million (2006: 15) and financial income on funding the discontinued business of €1 million (2006: 73).

The change of the fair value hedge of €3 million positive relates to the short term €500 million interest rate swaps which is offset by the fair value change of €3 million negative on the 5.125% Eurobond 2008, see note 14.

The fair value change of the financial assets through profit and loss relates to the remeasurement of the equity stake, see note 3.

Interest and similar expenses

Interest and similar expenses in 2007 of €191 million mainly relate to interest expense on bank overdrafts and bank loans of €79 million, (2006: 117) of which €58 million (2006: 93) relate to a gross up of interest on cash pools (fully offset by an equal amount in interest income), interest expenses on long term borrowings of €75 million (2006: 52), interest on foreign currency hedges of €18 million (2006: 31), interest on taxes €6 million (2006: 21) and interest on funding the discontinued business of €0 million (2006: 21).

23 Income taxes: 316 million (2006: 395)

Income taxes in the statements of income of 2007 amount to €316 million (2006: 395), or 28.8% (2006: 32.3%) of income before income taxes.

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Year ended at 31 December 2007 2006
Dutch statutory income tax rate: 25.5 29.6
Adjustment regarding effective income tax rates other countries 2.6 0.8
Permanent differences:
Non and partly deductible costs 1.0 1.5
Exempt income (0.4) (0.7)
Other 0.1 1.1
Effective income tax rate 28.8 32.3
  • (in percentages)

Income taxes differ from the amount calculated by multiplying the Dutch statutory corporate income tax rate with the income before income taxes. In 2007, the effective income tax rate was 28.8% (2006: 32.3%), which is higher than the statutory corporate income tax rate of 25.5% in the Netherlands (2006: 29.6%). This is due to several permanent differences such as non-deductible costs, exempt income and the effect of different statutory tax rates in countries outside the Netherlands. The line “other” in 2007 includes a positive impact of 6.4% relating to the recognition of deferred tax assets for loss carry forward positions that were previously unrecognised. TNT was able to recognise these assets based on improvements in actual and projected future results, now enabling the group to substantiate that recoverability of the assets is probable. This effect was partly balanced by the adverse effect of 3.5% of losses for which no deferred tax assets could be recognised due to uncertainty regarding the recoverability of such assets. In addition, the line “other” includes a net adverse impact of 2.2% on TNT’s deferred tax position caused by a decrease of statutory tax rates in several countries. The remaining “other” of 0.8% consists of a total of several smaller effects.

Income tax expense consists of the following:

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Year ended at 31 December 2007 2006
Current tax expense 269 396
Changes in deferred taxes (excluding acquisitions/foreign exchange effects) 47 (1)
Total income taxes 316 395
  • (in € millions)

In 2007, the current tax expense amounted to €269 million (2006: 396). The difference between the total income taxes in the statements of income and the current tax expense is due to timing differences. These differences are recognised as deferred tax assets or deferred tax liabilities.

The income tax receivable at 31 December 2007 amounts to €35 million (2006: 8) and the income tax payable amounts to €69 million (2006: 280). In 2007 TNT paid income taxes for an amount of €492 million (2006: 282) of which €166 million related to prior years.

The following table shows the movements in deferred tax assets:

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Provisions Property, plant and equipment Losses carried forward Other Total
Deferred tax assets at 31 December 2005 18 6 71 93 188
Transfers to assets held for sale (1) (2) (3)
Changes charged directly to equity 15 15
Changes via statements of income 14 2 (6) (1) 9
(De)consolidation/foreign exchange effects (1) 3 2
Deferred tax assets at 31 December 2006 32 8 63 108 211
Reclassifications (3) (6) (1) (11) (21)
Changes charged directly to equity (5) (5)
Changes via statements of income (2) 5 46 (29) 20
(De)consolidation/foreign exchange effects (1) (1) (2)
Deferred tax assets at 31 December 2007 27 7 107 62 203
  • (in € millions)

For deferred tax assets an amount of €10 million (2006: 14) is to be recovered within 12 months and an amount of €193 million is to be recovered after 12 months (2006: 197).

Deferred tax assets and liabilities are presented net in the balance sheet if TNT has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred taxes relate to the same fiscal authority.

Out of the total “other” deferred tax assets of €62 million (2006: 108) an amount of €40 million (2006: 61) relates to temporary differences for assets that are both capitalised and depreciable for tax purposes only.

The total accumulated losses available for carry forward at 31 December 2007 amounted to €720 million (2006: 689). With these losses carried forward, future tax benefits of €203 million could be recognised (2006: 221). Tax deductible losses give rise to deferred tax assets at the statutory tax rate in the relevant country. Deferred tax assets are recognised if it is probable that they will be realised. The probability of the realisation is impacted by uncertainties regarding the realisation of such benefits, for example as a result of the expiry of tax losses carried forward and projected future income. As a result TNT has not recognised €96 million (2006: 158) of the potential future tax benefits and has recorded deferred tax assets of €107 million at the end of 2007 (2006: 63).

The expiration of total accumulated losses is presented in the table below:

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2008 9
2009 9
2010 18
2011 25
2012 and thereafter 261
Indefinite 398
Total 720
  • (in € millions)

The following table shows the movements in deferred tax liabilities:

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Provisions Property, plant and equipment Other Total
Deferred tax liabilities at 31 December 2005 153 62 18 233
Transfers to liabilities related to assets held for sale (2) (2)
Changes via statements of income (8) 3 13 8
(De)consolidation/foreign exchange effects 1 1
Deferred tax liabilities at 31 December 2006 145 65 30 240
Reclassifications (3) 7 (25) (21)
Changes via statements of income 58 12 (3) 67
(De)consolidation/foreign exchange effects 3 9 12
Deferred tax liabilities at 31 December 2007 200 87 11 298
  • (in € millions)

For deferred tax liabilities an amount of €44 million (2006: 19) is to be settled within 12 months and an amount of €254 million (2006: 221) is to be settled after 12 months.