Healthy net assets and financial position
Strong cash flow
Increased dividend
Group procurement
Slight decrease in workforce

Further rise in revenue and earnings

In fiscal year 2001, Deutsche Post World Net increased its revenue by 2.1% to 33.4 billion. Not including the interest-rate related revenues of the FINANCIAL SERVICES Corporate Division, the revenues of the MAIL, EXPRESS and LOGISTICS Corporate Divisions rose by a total of 4.7%. The share of revenue generated abroad in the year under review amounted to 32.9%, and international revenues increased 15.0% year-on-year. This clearly shows that the Group has continued to pursue its internationalization strategy. 74.6% of foreign revenue was attributable to the rest of Europe (excluding Germany), while 25.4% was generated outside Europe.

We beat our record results for 2000 not only in terms of revenue, but also for our profit from operating activities (EBITA),which rose by 174 million or 7.3% to 2,553 million. In particular, the EXPRESS and LOGISTICS Corporate Divisions recorded substantial rises in profits.

Goodwill amortization of 171 million, up 27 million year-on-year, reduced earnings. This was largely due to the first-time full-year consolidation of the companies acquired in the previous year.

The profit from operating activities (EBIT) after the deduction of goodwill amortization amounted to 2,382 million in 2001. This corresponds to an increase of 147 million or 6.6% as against 2000.

The financial result declined by 32 million year-on-year to a net financial loss of 229 million. This includes the loss from associates, and for the most part, interest expenses. The net profit for the year after financial result and taxes amounted to ,593 million, growing 4.3% year-on-year. The (basic) earnings per share for fiscal year 2001 are 1.42 (up 4.4%). Further information on the individual income and expense items is presented in the Notes.

MAIL
Despite the weak economy, at 11.7 billion the MAIL Corporate Division was able to maintain its revenue level. Core services provided by this corporate division include the transport and delivery of written communications by three business divisions: Mail Communication, Direct Marketing and Press Distribution.

Despite the partial access to services required by the regulatory authority, allowing major customers and competitors access to parts of our networks, and the economic slowdown revenue from Mail Communication, the strongest business division, remained at a high level. We were able to generate further revenue potential from new product-related services.

At 1,960 million, the profit from operating activities (EBITA) remained at last year’s positive level despite the difficult economic environment. Operating expenses before depreciation and amortization increased slightly on account of a 1.2% rise in operating expenses in line with the general increase in prices.

EXPRESS
The EXPRESS Corporate Division increased its revenue in the year under review by 0.4 billion to 6.4 billion, although competition on all markets served by its three business divisions has increased. These business divisions are: Express Germany (domestic parcel services), Express Europe (European parcel services) and Global Mail (international mail logistics).

The revenues recorded by all three business divisions increased in 2001. For example, Express Europe was up by 10.0% year-on-year, while Global Mail recorded a considerable 20.4% rise. This was due mainly to the initial consolidation of companies acquired in the previous year, as well as the rise in average prices payable to us under the “REIMS II” agreement as a result of the high quality of our services.

Earnings growth was particularly impressive at 131.6%.Due to the first-time inclusion of compensation unusual in the competitive environment as infrastructural charges for the MAIL Corporate Division, profit from operating activities (EBITA) rose to 176 million. Other contributing factors were pricing and cost management in the Business Division Express Germany as well as positive developments in revenue and expenses in the Business Division Global Mail.

LOGISTICS
The LOGISTICS Corporate Division also recorded another increase in revenue. The globally operating Danzas group, comprising the Solutions, Intercontinental and Eurocargo Business Units, provides end-to-end supply chain solutions. These include tailor-made logistics solutions, international air and ocean freight, project forwarding and European overland transport.

Revenues recorded by the corporate division rose by 10.4% to 9.2 billion, from 8.3 billion in 2000. Besides additional acquisitions, this encouraging development was due to organic growth.

In 2001, the LOGISTICS Corporate Division further optimized its workflows and processes and successfully generated new business. Although this corporate division was particularly hard hit by the economic downturn and the terrorist attacks on September 11, it was able to increase its profit from operating activities (EBITA) by 40.7%, from 113 million to 159 million. The reasons for this increase include our flexible adjustment to changing market conditions and the realization of synergies gained from the integration of ASG and Nedlloyd ETD in the previous year.

FINANCIAL SERVICES
Postbank provides its customers with the full range of state-of-the-art financial services, from payment transactions through loans and investment to insurance.

At 7.6 billion, revenues from the FINANCIAL SERVICES Corporate Division were slightly down on the previous year’s figure of 8.0 billion. This drop of 4.8% is due to lower money market interest rates and lower average total assets. Postbank in its merged form can now afford to increasingly withdraw from the policy of money market and capital market transactions which both Postbank and DSL Bank as individual institutions had no option but to follow in the past.

The corporate division recorded a profit from operating activities (EBITA) in the amount of 522 million, up 17 million or 3.4% on last year’s result. Postbank continued its strict cost management and further improved and expanded its offering.

Healthy net assets and financial position

Comparative figures for the previous year as of December 31, 2000 have been added to the consolidated balance sheet in order to help explain the net assets and financial position. The net assets and financial position as of December 31, 2001 are as follows:

The Group continued to grow in fiscal year 2001, as can be seen for example from the increase in total assets by 4.3% or 6,421 million to 156,701 million (previous year: 150,280 million).

Noncurrent assets increased by 11.0% or 1,223 million to 12,304 million. Intangible assets increased by 20.6% or 305 million, mainly as a result of the reversal of the negative goodwill for the Deutsche Postbank group. In addition, long-term investments increased year-on-year by a total of 1,510 million, due to the increase in our investment in DHL International Limited (DHLI) and loans granted to this associate.

Receivables and other current assets fell by 27.8% to 4,834 million. This decline was due primarily to the reclassification of collection documents and the elimination of the currency translation adjustments, as hedges are now carried on the balance sheet under receivables and investment securities from financial services in accordance with IAS 39 (new accounting standard). Consequently, also in line with the expansion in business volumes, the receivables and investment securities from financial services attributable to the Deutsche Postbank group increased by 5.7% or 7,327 million. Current financial instruments and cash and cash equivalents within the Group both increased year-on-year. National and international cash pools are used for cash surpluses in order to optimize costs.

Deferred tax assets relate in particular to tax loss carryforwards at Deutsche Post AG and the Deutsche Postbank group. While deferred tax assets on loss carryforwards decreased by 540 million especially due to the reduction of loss carryforwards by 441 million at Deutsche Post AG, deferred tax assets on temporary differences rose by 213 million, attributable for the most part to the first-time application of IAS 39 by the Deutsche Postbank group. Overall, deferred tax assets decreased by 18.0% or 327 million.

Equity rose substantially by 33.8% or 1,352 million, from 4,001 million the previous year to 5,353 million. This development is due primarily to the increase in retained earnings.Minority interests decreased by a total of 5.1% or 4 million.

Provisions dropped from 11,107 million to 10,971 million. Liabilities from financial services attributable to the Deutsche Postbank group rose by 6,162 million. Financial liabilities fell by 4.4% to 2,308 million. Overall, liabilities increased by 5,209 million in line with total equity and liabilities.

Total equity and liabilities demonstrate that funding of total assets is sound. At the end of the fiscal year, Deutsche Post World Net has once again improved its asset and capital structure. The ratio of equity to noncurrent assets amounted to 43.5%. The Group’s continued growth is assured by its balanced equity-debt mix, and the figures given above reinforce the Group’s substantial financial strength.

Our current cash reserves and existing bank credit lines amounting to 3,058 million (5.0% of which had been drawn down at the end of the year) mean that we have sufficient funds to finance both the organic growth we are aiming for and our planned investments.

Strong cash flow

The key elements of the cash flow statement have been summarized below in order to explain the financial position (Postbank at equity).*

The cash flow statement reveals the cash flows in the year under review and hence the source and application of cash and cash equivalents. To do this, the company’s investing activities are compared with the source of the funds used for this purpose. The cash flow calculation is adjusted for the effects of currency translation and changes in the companies consolidated. Cash flow I fromoperations is determined by adjusting the net profit for the year before taxes for non-cash items.

* The complete consolidated financial statements including the Deutsche Postbank group accounted for at equity can be found at the end of this Annual Report.

Cash flow I improved as against the previous year by 8.8% to 3,028 million. This rise is largely due to the increase in net profit before taxes (up 44 million on the previous year to 2,018 million).

In the case of working capital, a cash inflow was recorded in the year under review for receivables and other current assets (previous year: cash outflow). This meant that Cash flow II (Cash flow I adjusted for changes to working capital) was up 411 million on the figure for the previous year, at 2,797 million.

Lower interest and tax payments led to a rise in net cash from operating activities (Cash flow III) of 678 million to 2,593 million.

Net cash used in investing activities in the year under review amounted to 2,020 million, as against 2,134 million the previous year.

The Group generated proceeds from the disposal of noncurrent assets in the amount of 1,031 million, as opposed to 818 million the previous year. 3,051 million (previous year: 2,952 million) was spent on investments in noncurrent assets. Of this figure, 919 million resulted from the acquisition of companies, and in particular from the acquisition of additional shares in DHLI amounting to 797 million,which are treated within the Group as investments in associates. The acquisitions were financed from cash flow. 2,132 million (previous year: 1,705 million) was spent on investments in other noncurrent assets.

The cash flow from financing activities consists of borrowings and loan repayments as well as the dividends distributed.The net cash outflow in the year under review amounted to 492 million, following a cash inflow of 236 million the previous year. The main reason for the difference as against 2000 is the increased level of debt repayment which, at 527 million, was up 360 million on the previous year’s figure.

All in all, the cash inflows and outflows described produced cash and cash equivalents at the end of the year in the amount of 594 million. This figure is 81 million up on that for the previous year.At the same time, the Group was also able to increase its internal financing resources.

Increased dividend

The Board of Management has proposed a dividend distribution of 412 million for fiscal year 2001 which corresponds to a dividend of 0.37 per share (previous year: 0.27 per share). The dividend distribution will thus be within the range envisaged at the time of our IPO of 25 to 30% of consolidated net profit.

Group procurement

Deutsche Post World Net has minimized its dependency on individual suppliers by spreading supply contracts across a wide range of suppliers and by concluding agreements accordingly. One significant cost factor for us is the purchase of fuel to run the vehicles in our fleet. Fuel prices fluctuated considerably during 2001, although average prices remained constant. At the end of the year under review, Deutsche Post World Net concluded contracts with the major fuel producers for the procurement of fuel in Europe.

Slight decrease in workforce

As of December 31, 2001 the Group employed a total of 276,235 full-time employees (previous year: 278,705). In the MAIL and FINANCIAL SERVICES Corporate Divisions, we were able to further reduce the number of employees on the previous year.By contrast, there was an increase in the number of employees in LOGISTICS due to our acquisitions in that corporate division.The workforce in the EXPRESS Corporate Division also increased.