With regard to the German economy, we expect to see only a weak recovery in the course of 2003, with GDP growth of less than 1%. The strongest impetus for growth is likely to come from exports, which will benefit from the trend towards a gradual global recovery. At the same time, however, the domestic economy will be held back by the significant pressure to consolidate due to the Federal Government’s financial policy. Spending cuts and tax increases are likely to lead to lower consumer spending and investment than in the other euro-zone countries.

Starting from fiscal year 2003, our mail business will also be affected by two external factors. From January, the price cuts ordered by the regulatory authority will have a negative impact on annual revenue and earnings to the tune of around €300 million. At the same time, the weight limit for letters in our exclusive license area will be lowered from 200g to 100g, or to three times the standard rate; as a result, approximately 5% of our revenue from mail will be opened up to competition. However, the increasing deregulation of the European mail markets also presents us with new opportunities.

We believe that the process of concentration on the courier, express and parcel service markets is set to continue. We are confident that we will be able to win further market share by bundling our express and logistics activities. With regard to logistics services, we also anticipate additional revenue potential from the sustained trend toward outsourcing on the market for contract logistics.

We expect the trend toward consolidation in the banking sector to continue. Banks are faced with the challenge of positioning themselves clearly on the market through customized offerings and sales channels, while at the same time efficiently employing advanced technologies in order to counteract rising cost pressure.

STAR is helping us to exploit cross-divisional synergies
With the acquisition in full of DHL in December 2002, we entered a new phase in our corporate development. From now on, our strategy will revolve around the STAR value creation program, which we will use to exploit cross-divisional synergies within the Group up to and including 2005. We will take the first comprehensive measures in fiscal 2003:

In the spring of 2003, we will bundle all of our express and logistics activities and market them internationally under the DHL brand name. Again in 2003, we will also start to merge the administrative centers of Deutsche Post Euro Express (Bonn), Danzas (Basel) and DHL at DHL’s existing Brussels location. In order to make our service offering more transparent to our customers, we will successively reduce and harmonize our product portfolio under the DHL brand. This will also allow us to optimize our processes, thereby making substantial cost savings. In addition, we are planning to put in place a joint sales structure for our customers worldwide. Reporting within the Group will be unaffected by these organizational changes. In 2003, there will be only one change in the reporting structure: the Eurocargo Business Unit will be transferred from the LOGISTICS Corporate Division to the EXPRESS Corporate Division.

With STAR, we have given our shareholders and the capital markets a clear indication of our commitment to value creation at Deutsche Post World Net. As part of these activities, we have set ourselves the goal of increasing profit from operating activities (EBITA) to €3.1 billion by the end of 2005.

First positive effects from STAR
Fiscal year 2003 is the first full year of work on the implementation of the STAR program. We plan to energetically pursue the ambitious goals we have set ourselves within the framework of this program.

In 2003, our goal is to start offsetting the decline in earnings in the MAIL Corporate Division resulting from the ruling by the regulatory authority. We aim to have achieved this by the end of 2005. In the EXPRESS Corporate Division, we intend to press ahead with the restructuring of DHL USA in fiscal year 2003. On the German and European CEP markets, we are aiming to further increase our volume and to tackle the ambitious goals that we have set ourselves as part of STAR. We will follow the same strategy in the LOGISTICS Corporate Division.

In the FINANCIAL SERVICES Corporate Division, we are focusing on solutions which are tailored to individual target groups.We will expand our business with corporate customers. Logistics finance will become extremely important within the context of our logistics activities under the high-performance DHL brand. In addition, we will further strengthen our core business area of retail banking and realize additional cost reductions by implementing innovative information technologies.