We have combined our comprehensive written communication services in Germany in the MAIL Corporate Division, which is composed of the Business Divisions Mail Communication, Direct Marketing and Press Distribution. With a nationwide infrastructure of around 13,000 retail outlets, 140,000 mail boxes and 62,300 delivery districts, we serve over 39 million households and three million business customers across Germany.

Mail market remains stable
The German mail market had a total volume of 7.8 billion in 2001, up from 7.7 billion in 2000. This means that the mail market has continued to develop positively despite the weak economy and the continuing rise of the Internet's popularity - and that our competitors have set their sights on this market as well. In the largely deregulated German market, these companies are permitted to operate in this business outside our exclusive license area in delivering letters weighing over 200g. Letters weighing less than this may only be delivered by competitors if they offer high-quality services such as guaranteed delivery on the same day. Our competitors were able to increase market share in both segments, particularly in the case of local mail delivery by third parties, so-called local post, which now accounts for 2.7% of the overall mail market, up from 1.8%. Our Business Division Mail Communication is still solid with a share of 95.0% of the overall market.

Following the boom in 2000, the growth trend in the advertising industry has slowed considerably in the year under review, with the trend reversing in some areas.The volume of the German advertising market amounted to around 41.3 billion. As in the past, the advertising business relies heavily on paperbased mailings as a medium for reaching customers directly. Nonetheless, the direct marketing segment, which is important to our business, also saw a slowdown in growth. The market for advertising mailings, telemarketing and e-marketing amounted to a forecast volume of 13.3 billion in 2001 with Deutsche Post World Net holding a market share of 15.6%.

The market for press product distribution amounted to a forecast volume of approximately 21 billion items, as in the previous year. This segment also felt the effects of the economic downturn in 2001. The circulation increases at consumer magazines were cancelled out by equal circulation decreases, particularly in the specialist financial press. On the whole, we saw decreases in page numbers due to the lower advertising revenue at these publications. Our main competitors in this highly fragmented market are distributors of local newspapers. Our Business Division Press Distribution generated 11.0% of the total sales of this market, i.e. the same share as last year.

Strong stable revenues despite weak economy
At 11,707 million, the MAIL Corporate Division was able to maintain its high revenue level, with the revenue per business day remaining stable at 47.0 million. Revenue per employee rose by 2.3% to 85,400.

At 21.64 billion items, the volume of delivered mail reached the previous year's high level. This means that on every business day of the year, we again delivered more than 72 million items.

The Business Division Mail Communication's sales volume remained stable at a high level: 9,293 million letter items. We have our business services to thank for this success because the sales we generated with business customers increased slightly despite the weak economy. A key factor in this development was the expansion of so-called hybrid mailings; we receive data electronically, which we then print out and deliver in the form of a letter. We were also able to acquire additional orders for hybrid mail services. For example, GZS Gesellschaft für Zahlungssysteme signed a major contract with us for printing over 40 million letters per year. GZS sends us the data, and we print out the letters, insert them in envelopes and frank them, and our mail carriers subsequently deliver the letters to customers. This contract also includes printing all of the company's VISA and Eurocard bills. Targeted marketing activities, such as the “Love Letters” campaign with the artist HA Schult as part of the new series of events entitled “Ein Brief setzt Zeichen” (“Letters Make a Mark”), and the expansion of our marketing activities aimed at children and young people enabled us to further cut volume losses in the private customer segment.

Revenue in this business division remained constant at 7,367 million compared to the previous year's level of 7,371 million.

The Business Division Direct Marketing saw a slight decrease in sales by 0.8% to 10.0 billion mail items. The decrease in unaddressed advertising mail sales had been planned in order to achieve a rise in the average price. Addressed advertising mail recorded a sales increase. Thus, at 2,072 million, revenues remained almost stable. Factors contributing to this were product innovations such as Mailingfactory, a multimedia application for designing mailing campaigns. Small and medium-sized commercial customers with Internet access can use this application to quickly, flexibly and efficiently design their direct marketing campaigns in-house. The subsidiaries' segments achieved a 21.9% revenue growth.

Despite the difficult economic environment, the Business Division Press Distribution was able to reproduce the good results of the previous year. Although sales declined slightly by 0.6% to 2.3 billion items, revenues remained stable at 841 million.

Profit remains high
Profit from operating activities (EBITA) amounted to 1,960 million, a decline of only 2.2% over the previous year.The main reason for the decrease was the rise in operating expenses by 1.2% (up 41 million to 3,538 million) in line with the general increase in prices. In view of the difficult conditions in the year under review, due also to the weak economy, the anthrax problem and the early onset of winter, this is a good result.

Investments boost automation
Once again, in 2001 we improved the technical standard of the equipment in our 83 mail sorting centers and increased the degree of automation to 87%, up from the already high level of 85% last year. This figure ranks very highly in international comparisons. In the year under review, we optimized the reading techniques used in carrier sequence barcode sorters to achieve an increase in sorting quality.

This corporate division's investments in the year under review declined by around 120 million. The reason for this development was the implementation of the Retail Outlet Concept 2000 for the purpose of modernizing the outlet network.

Continued high quality in mail delivery
Technischer Überwachungsverein (TÜV) Rheinland again audited and certified letter transit times in 2001. Its conclusion was that Deutsche Post World Net delivered 95% of letters to their recipients one day after mailing in the year under review.

In terms of addressed advertising mail, we were able to shorten transit times considerably compared to last year. Whereas in the prior year 94% of these mailings were delivered to recipients four days after they were handed over to Deutsche Post, 96% of mailings met this standard in 2001. This provides our business customers with an increased level of planning reliability. For example, business customers can find out exactly when they must increase staff levels in their call centers following the mailing of advertising mail.

Comprehensive security measures implemented
One of the main topics dominating the media in 2001 was the mailing of anthraxlaced letters in the USA which resulted in several people being infected with anthrax. After the first few cases became known, several imitators in Germany sent envelopes containing white powder; all of these envelopes were subsequently determined to be harmless. Our mail sorting centers experienced temporary interruptions due to suspicious mail, and some sites were even closed for a short time or had their services curtailed. Deutsche Post World Net has taken all possible precautions as part of a comprehensive security concept to protect customers and employees alike. Professional crisis management enabled us to continue to run our Germany-wide mail logistics operations without serious interruptions even during these incidents.

Outlook
Our strategy is to safeguard our core business and to generate further revenue from new products.We are confident that products that integrate letters and the Internet in an intelligent way have impressive market potential, as the successful example of our Mailingfactory application shows. In 2002, we aim to once again increase our productivity. In this regard, we anticipate enjoying the initial successes generated by outsourcing transport services and streamlining management structures in our mail sorting centers. Both of these measures will lead to substantial cost savings.