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19 Salaries Pensions And Social Security Contributions

1,561 million (2009: 1,473)

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Year ended at 31 December2010 2009
Salaries 1,429   1,268
Share based payments 8   5
Pension (income)/charges:      
Defined benefit plans (42)   28
Defined contribution plans 5   4
Social security charges 161   168
Total 1,561   1,473
(in € millions)      

The salaries of €1,432 million include a net amount of €229 million related to the restructuring Master Plan III and Data and Document Management. The pension charges/income of €42 million includes a curtailment gain of €74 million related to the restructuring Master Plan III. The share-based payment expense of €5 million excludes the charges for Express.

Labour force

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 2010 2009
Employees1      
Mail in NL 56,409   58,181
Parcels 3,068   3,139
International 15,803   16,833
Mail other 1,875   1,721
Total at year end 77,155   79,874
Employees of joint ventures2 3,258   2,872
External agency staff at year end 12,565   24,028
Full-time equivalents (FTEs)1      
Mail in NL 26,245   27,825
Parcels 2,674   2,705
International 7,009   7,508
Mail other 1,734   1,589
Total year average 37,662   39,627
FTEs of joint ventures2 2,576   2,531
1
Including temporary employees on our payroll.
2
These numbers represent all employees and FTEs in the joint ventures.

The reported employees match the number of personnel paid through payroll. For CR purposes this definition is extended to include all personnel paid through payroll and entitled to all the benefits of a TNT employee.

At the end of 2010, 3,258 people (2009: 2,872) were employed by joint ventures, of whom 1,333 (2009: 1,708) were on the payroll of Dutch companies, primarily Postkantoren B.V., and 1,925 (2009: 1,164) were on the payroll of companies outside the Netherlands.

Apart from the headcount of employees the labour force is also measured in full-time equivalents (FTEs) based on the hours worked divided by the local standard. In 2010 the average number of FTEs in the Mail division decreased compared to 2009. The FTE reduction within Mail in the Netherlands and International has been partly offset by an increase in FTEs within Mail other.

Remuneration of members of the Supervisory Board

For the year 2010, the remuneration of the current members of the Supervisory Board amounted to €579,500 (2009: 565,239). The remuneration of individual members of the Supervisory Board is set out in the table below:

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Year ended at 31 DecemberBase compensation Other payments1 Total remuneration
Mr P. C. Klaver 60,000   35,500   95,500
Mr S. Levy 45,000   21,000   66,000
Mr R.J.N. Abrahamsen 45,000   18,500   63,500
Ms P.M. Altenburg 45,000   12,500   57,500
Mr. V. Halberstad 12,240   2,500   14,740
Ms M.E. Harris 45,000   21,000   66,000
Mr R. King 45,000   9,000   54,000
Mr W. Kok 45,000   20,500   65,500
Mr G.J. Ruizendaal 45,000   16,000   61,000
Mr J. Wallage 32,760   3,000   35,760
Total 420,000   159,500   579,500
(In €)
1
Payments relating to number of Supervisory Board committee meetings attended.

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 2010 the total remuneration of the Board of Management consisted of:

The 2010 values of each of these remuneration elements is reported per member of the Board of Management below.

Total remuneration

In 2010, the remuneration, including pension and social security contributions of the current Board of Management amounted to €6,073,396 (2009: 5,579,689).

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

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 Base salary Accrued for short term incentive Accrued for long term incentiveOther periodic paid compensationPension costs Total 2010 Total 2009
Peter Bakker 918,000   606,893   362,005 133,864 109,968   2,130,730   2,149,384
Bernard Bot1 187,500   281,939   50,204 27,573 61,682   608,898    
Harry Koorstra 612,000   396,945   214,842 168,665 99,299   1,491,751   1,440,988
Marie-Christine Lombard 612,000   343,395   214,842 390,260 281,520   1,842,017   1,989,317
Total current members 2,329,500   1,629,172   841,893 720,362 552,469   6,073,396   5,579,689
                       
Henk van Dalen1 459,000   12,134   172,813 118,624 71,453   834,024   2,005,985
Total former members 459,000   12,134   172,813 118,624 71,453   834,024   2,005,985
(In €)
(In €)
1
Henk van Dalen left the company per 1 October 2010. Bernard Bot is acting CFO since 1 August 2010. Includes costs only for the period relating to Board membership. The accrued for short term incentive amounts include a discretionary bonus.

Base salary

The base salary for the members of the Board of Management did not been increase in 2010 and was maintained at €918,000 for the CEO and €612,000 for the other members of the Board of Management. Mr Bot was appointed as acting CFO on 1 August 2010 and his annual base salary is fixed at €450,000.

Other periodic paid compensation

The other periodic paid compensation includes company costs related to tax and social security, company car and other costs. It also includes salary allowances made as compensation for the change in pension system as from 2006 onwards. For Ms Lombard other periodic paid compensation includes French social taxes and French social security contributions, calculated on the full salary package i.e. base salary, bonus and performance shares.

Variable compensation

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In the table below the total accrued variable compensation in 2010 to the members of the Board of Management is shown:

 Accrued for short term incentive Accrued for long term incentive Total 2010
Peter Bakker 606,893   362,005   968,898
Bernard Bot1 281,939   50,204   332,143
Harry Koorstra 396,945   214,842   611,787
Marie-Christine Lombard 343,395   214,842   558,237
Total current members 1,629,172   841,893   2,471,065
Henk van Dalen1 12,134   172,813   184,947
Total former members 12,134   172,813   184,947
(In €)
1
Includes costs only for the period relating to Board membership. The accrued for short term incentive amounts include a discretionary bonus.

Accrued short-term incentive

The accrued short-term incentive consists of the accrued bonuses for the performance of the year reported, paid in cash in the next year and the costs relating to the bonus/matching share plan.

Bonus accrual for 2010 performance

Since 2002, TNT accounts for bonus payments on the basis of the accrued bonuses for the performance of the year reported. In 2010, an amount of €1,599,930 (2009: 1,811,350) was paid to the members of the Board of Management for performance over 2009.

In the table below the amount of €1,566,207 reflects the accrued bonuses for performance over 2010, which will be paid in 2011.

The 2010 accrued short-term incentive amounts for the members of the Board of Management are accrued as set out below:

Bonus/matching share plan

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 Accrued for 2010 bonus as % of base pay Accrued for bonus matching shares1 Accrued for short term incentive
Peter Bakker 585,225   64%   21,668   606,893
Bernard Bot2 269,532   144%   12,407   281,939
Harry Koorstra 382,500   63%   14,445   396,945
Marie-Christine Lombard 328,950   54%   14,445   343,395
Total current members 1,566,207       62,965   1,629,172
               
Henk van Dalen         12,134   12,134
Total former members         12,134   12,134
(in €, except percentages)
1
As of 2008 the members of the Board of Management are no longer eligible to receive matching shares, with the exception of Bernard Bot who was eligible up to the date he was appointed to the Board of Management. Included are costs for matching shares granted in 2007, except for Bernard Bot, where it includes costs for matching shares granted in 2007, 2009 and 2010. Includes costs only for the period relating to Board membership.
2
The accrued for short term incentive amounts include a discretionary bonus.

As of 2008, the members of the Board of Management are no longer eligible to participate in the bonus/matching plan. Mr Bot was eligible to participate in the scheme up to his appointment as acting member of the Board of Management (no participation in 2008). The amount of €62,965 reflects the accrued costs in 2010 for the rights on matching shares that were granted in 2007, 2009 and 2010 for Mr Bot (but only insofar these relate to his Board membership period), and 2007 for the other members of the Board of Management (excluding Mr van Dalen).

Under the bonus/matching plan, of the net bonus amount received an amount equal to 25% of the gross bonus was used by the Board members to purchase own TNT shares (bonus shares). Upon such purchase, a right on matching shares was granted. The number of bonus 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 bonus shares is retained for a period of three years and provided continued employment, the right will vest and the company will match the number of 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.

All members of the Board of Management participated in the scheme for the bonus earned during their membership of the Board of Management, up until 2007 (except Mr Bot).

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

Board of Management1

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     Number of matching rights on shares  
  Year   Outstanding 1 Jan 2010   Granted during 2010   Vested during 2010   Outstanding 31 Dec 2010   Remaining years in contractual life
Peter Bakker 2007   5,213       5,213        
Bernard Bot2 2007   1,245       1,245        
  2009   3,365           3,365   0.4
  2010       2,763       2,763   0.4
Harry Koorstra 2007   3,476       3,476        
Marie-Christine Lombard 2007   3,476       3,476        
Total current members     16,775   2,763   13,410   6,128    
Henk van Dalen 2007   2,919       2,919        
Total former members     2,919   0   2,919        
1
As of 2008 the members of the Board of Management are no longer eligible to receive matching shares.
2
Granted before his appointment as (acting) member of the Board of Management, no participation in 2008.

In 2010 the average price on vesting for matching shares for the members of the Board of Management was €23.05.

Accrued long-term incentive
Costs of the long-term incentive

The maximum numbers of performance shares that can vest amount to 150% of base allocation. In the table below, the total costs of the rights on performance shares granted to the members of the Board of Management are shown:

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  Costs in 2010 from performance shares granted in 2007  Costs in 2010 from performance shares granted in 2008  Costs in 2010 from performance shares granted in 2009  Costs in 2010 from performance shares granted in 2010  Accrued for long term incentive
Peter Bakker 89,285   134,129   138,591       362,005
Bernard Bot1     15,905   17,481   16,818   50,204
Harry Koorstra 46,727   70,197   97,918       214,842
Marie-Christine Lombard 46,727   70,197   97,918       214,842
Total current members 182,739   290,428   351,908   16,818   841,893
Henk van Dalen1 46,727   52,648   73,438       172,813
Total former members 46,727   52,648   73,438   0   172,813
(In €)
1
Includes costs only for the period relating to Board membership.

The costs 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 by taking into account statistical evidence of non-market conditions, which costs then subsequently are amortised over the vesting period.

Vesting of the long-term incentive

The vesting of the performance shares depends on the company’s performance on total shareholder return. TNT’s relative total shareholder return over the period from 4 May 2010 through 3 May 2013 governs the performance share grant for 2010. For the 2009 grant that period is from 5 May 2009 through 4 May 2012, for the 2008 grant that period is from 28 April 2008 through 27 April 2011, and for the 2007 grant it is from 4 May 2007 through 3 May 2010. In compliance with the Dutch corporate governance code, the members of the Board of Management may not sell their performance 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.

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 2010.

Board of Management1

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   Performance shares
 Year Vesting % of base allocation Vesting as if per 31 Dec 2010
Peter Bakker 2008   20.2%   5,020
  2009   54.4%   22,328
Bernard Bot 2008   20.2%   1,429
  2009   54.4%   6,759
  2010   9.4%   713
Harry Koorstra 2008   20.2%   2,627
  2009   54.4%   15,775
Marie-Christine Lombard 2008   20.2%   2,627
  2009   54.4%   15,775
Total         73,053

Long-term incentive/performance share plan

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

Board of management1

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   Number of rights on performance shares  
 Year Outstanding 1 Jan 2010 Granted during 2010 Vested during 2010 Forfeited during 2010 Outstanding 31 Dec 2010 Remaining years in contractual life
Peter Bakker 2007   37,275       3,407   33,868        
  2008   37,275               37,275   0.3
  2009   61,565               61,565   0.4
Bernard Bot 2007   8,249       754   7,495        
  2008   10,608               10,608   0.3
  2009   18,637               18,637   0.4
  2010       11,382           11,382   0.4
Harry Koorstra 2007   19,508       1,784   17,724        
  2008   19,508               19,508   0.3
  2009   43,497               43,497   0.4
Marie-Christine Lombard 2007   19,508       1,784   17,724        
  2008   19,508               19,508   0.3
  2009   43,497               43,497   0.4
Total current members     338,635   11,382   7,729   76,811   265,477    
Henk van Dalen 2007   19,508       1,784   17,724        
  2008   19,508           19,508        
  2009   43,497           43,497        
Total former members     82,513   0   1,784   80,729        
1
As of 2010 the members of the Board of Management are no longer eligible to receive rights on performance shares, with the exception of Bernard Bot who was eligible up to the date he was appointed as (acting) member of the Board of Management.

In 2010 the average price on vesting for performance shares for the members of the Board of Management was €21.26.

Long-term incentive/share option plan

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The table below summarises the status of the outstanding options (no relating costs in 2010) to acquire a number of TNT ordinary shares granted to the Board of Management.

   Number of options   Amounts in €
 Year Outstanding 1 Jan 2010 Exercised during 2010 Forfeited during 2010 Outstanding 31 Dec 2010 Exercise price Share price on exercise date
Marie-Christine Lombard 2004   30,000   30,000       0   18.44   22.63
Total current members     30,000   30,000       0        

Pension

The pension costs consist of the service costs for the reported year. Mr Bakker, Mr Koorstra and Mr Bot are participants in a career average defined benefit scheme. Ms Lombard participates in a French defined contribution pension scheme. The pensionable age of all members of the Board of Management is 65 years.

Unwinding of existing equity plans conditional to the demerger

Subject to approval of the demerger proposal by the shareholder, the unvested rights on performance shares and matching shares granted in 2010 and 2009 will be unwound immediately before the demerger date. All schemes will be terminated before the planned demerger and no ‘legacy plans’ will exist thereafter. The unwinding will be executed as described below unless the Supervisory Board decides otherwise in the period before the demerger.

The existing and unvested rights on performance shares and matching shares will vest on a pro-rated basis in accordance with current plan rules and, for the performance shares, applying the then most recent performance criteria.

The unwinding of the unvested performance shares and matching shares will be settled in cash and paid to the respective member of the Board of Management.

SENIOR MANAGEMENT

Performance share plan senior management

The performance share plan is an equity-settled scheme with annual grants. Participants will be granted a conditional right to a maximum 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 his/her future contribution to the company.

Participants will become the economic owner of the share after a period of three years (vesting period). The plan includes market-based vesting conditions such that the number of to be delivered shares (nil up to the maximum comprising the right) is dependent on the company’s performance on total shareholder return. These conditions are included in the calculation of the fair value at the grant date.

Performance shares were granted in May 2010 to 865 TNT managers, excluding Mr Bot (Mail: 253, Express: 612) at a fair value of €12.39 each. These grants were part of the policy to annually grant rights on performance shares to eligible members of senior management from 2005 onwards.

The right on performance shares forfeits upon termination of employment prior to vesting. However, 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 2010 is stated below.

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   Number of rights on performance shares
 Year Outstanding 1 Jan 2010 Granted during 2010 Vested during 2010 Forfeited during 2010 Outstanding 31 Dec 2010 Remaining years in contractual life
Management1 2007   614,448       52,877   561,571        
  2008   916,901       10,677   38,664   867,560   0.3
  2009   1,765,327       18,567   79,611   1,667,149   0.4
  2010       1,167,733   339   13,441   1,153,953   0.4
Total Express     3,296,676   1,167,733   82,460   693,287   3,688,662    
1
Excludes performance shares granted to Bernard Bot before his appointment as (acting) member of the Board of Management.

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   Number of rights on performance shares
 Year Outstanding 1 Jan 2010 Granted during 2010 Vested during 2010 Forfeited during 2010 Outstanding 31 Dec 2010 Remaining years in contractual life
Management 2007   266,203       24,842   241,361        
  2008   379,375       3,458   16,276   359,641   0.3
  2009   680,851       4,218   25,627   651,006   0.4
  2010       446,143   250   4,649   441,244   0.4
Total Mail     1,326,429   446,143   32,768   287,913   1,451,891    

In 2010, the average price on vesting for performance shares for the management (excluding Mr Bot) was €21.22 (Mail: €21.20, Express: €21.23).

Option plan senior management

In 2005, the option plan was replaced by the performance share plan. Final option awards occurred in 2004.

Statements of changes of outstanding options

The table below also includes the outstanding options of the members of the Board of Management and senior management. All options granted entitle the holder to the allotment of ordinary shares when they are exercised and are equity settled.

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   Number of options   Amounts in €  
 Year Outstanding 1 Jan 2010 Exercised during 2010 Forfeited during 2010 Outstanding 31 Dec 2010 Exercise price Share price on exercise date Remaining years in contractual life
Board of Management 2004   30,000   30,000           18.44   22.63    
Management 2003   36,109   18,684       17,425   13.85   19.63   0.1
  2003   3,000           3,000   14.51       0.4
  2004   185,451   21,000   2,600   161,851   18.44   20.73   0.4
Total Express     254,560   69,684   2,600   182,276            

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   Number of options   Amounts in €  
 Year Outstanding 1 Jan 2010 Exercised during 2010 Forfeited during 2010 Outstanding 31 Dec 2010 Exercise price Share price on exercise date Remaining years in contractual life
Management 2003   20,550   6,750       13,800   13.85   20.95   0.1
  2004   81,400   6,400   1,000   74,000   18.44   22.06   0.4
Total Mail     101,950   13,150   1,000   87,800            

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Historic overview outstanding options

  2010 2009
  Number of options Weighted average exercise price (in €) Number of options Weighted average exercise price (in €)
Balance at beginning of year   356.510   17.68   409,010   17.64
Exercised   (82,834)   21.29   (28,250)   20.34
Forfeited   (3,600)   18.44   (24,250)   18.01
Balance at end of year   270.076   17.87   356,510   17.68
Exercisable at 31 December   270,076   17.87   356,510   17.68

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 bonus in cash and can convert 25% as a grant of TNT shares with an associated matching right in 2010 (102,777, of which Mail: 29,654, Express: 73,123), 2009 (93,796, of which Mail: 47,917, Express: 45,879), 2008 (103,558, of which Mail: 40,268, Express: 63,290) and 2007 (74,253, of which Mail: 23,340, Express: 50,913) if at least 50% of the shares are kept for three years. The above figures exclude Mr Bot. 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. Grants are made in accordance with the bonus/matching plan, which has been approved by the Supervisory Board.

The significant aspects of the plan are:

The exercise of the rights on matching shares is subject to the TNT rules concerning inside information. 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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   Number of matching rights on shares  
 Year Outstanding 1 Jan 2010 Granted during 2010 Vested or forfeited during 2010 Outstanding 31 Dec 2010 Remaining years in contractual life
Management1 2007   41,894       41,894        
  2008   60,415       4,697   55,718   0.3
  2009   52,556       1,469   51,087   0.4
  2010       73,123   727   72,396   0.4
Total Express     154,865   73,123   48,787   179,201    
1
Excludes matching rights granted to Bernard Bot before his appointment as (acting) member of the Board of Management.

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   Number of matching rights on shares  
 Year Outstanding 1 Jan 2010 Granted during 2010 Vested or forfeited during 2010 Outstanding 31 Dec 2010 Remaining years in contractual life
Management 2007   18,085       18,085        
  2008   32,231       1,147   31,084   0.3
  2009   38,765       2,291   36,474   0.4
  2010       29,654   814   28,840   0.4
Total Mail     89,081   29,654   22,337   96,398    

In 2010 the average price on vesting for matching shares for the management was €22.85 (Mail: €22.73, Express: €22.94).

Unwinding of existing equity plans conditional to the demerger

Subject to approval of the demerger proposal by the shareholder, the unvested rights on performance shares and matching shares granted in 2010 and 2009 as well as any unexercised options will be unwound immediately before the demerger date. All schemes will be terminated before the planned demerger and no ‘legacy plans’ will exist thereafter. The unwinding will be executed as described below unless the Supervisory Board decides otherwise in the period before the demerger.

The existing and unvested rights on performance shares and matching shares will vest on a pro-rated basis in accordance with current plan rules and, for the performance shares, applying the then most recent performance criteria.

The unwinding of the unvested performance shares and matching shares will be settled in cash and paid to the eligible management and employees.

The exercise period of the employee options for TNT shares will be shortened and will end immediately before the planned demerger date. The value upon demerger of any unexercised option will be calculated in accordance with a generally accepted option valuation model and will be paid to the eligible management and employees.

Fair value assumptions and hedging

TNT’s share-based payments 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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 2010 2009
Share price (in €) 22.18   15.18
Volatility (%) 41.44   39.80
Vesting period (in years) 3   3
Risk free rate (%) 1.72   2.14
Dividend yield (%) 2.48   2.35

As of 4 May 2010, the 2010 grant date, the fair value of the matching shares awarded was €20.54 and the fair value of the performance shares awarded was €12.39. As of 5 May 2009, the 2009 grant date, the fair value of the matching shares awarded was €14.11 and the fair value of the performance shares was €8.75. As of 28 April 2008, the 2008 grant date, the fair value of the matching shares awarded was €23.17 and the fair value of the performance shares awarded was €13.00. As of 4 May 2007, the 2007 grant date, the fair value of the matching shares was €29.88 and the fair value of the performance shares awarded was €17.03.

TNT manages its risk in connection with the obligations the company has under the existing share and option plans by purchasing shares on the market. In 2010, TNT did not purchase any additional shares to cover its obligations under the existing share and option schemes.

At 31 December 2010, TNT held a total of 188,757 shares to cover its obligations under the existing share and options schemes (2009: 488,691).

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