In fiscal year 2002, we successfully continued on our path towards becoming the world’s largest integrated logistics service provider, in addition to repeating our track record of strong earnings. With our Group-wide value creation program, STAR, we intend to significantly increase Deutsche Post World Net’s earnings power over the next three years and thus lay the foundation for future growth.

Progress based on core strengths outweighs adverse external decisions
In fiscal year 2002, Deutsche Post World Net leveraged its core strengths and thus made significant progress towards becoming the No. 1 logistics service provider worldwide. The complete takeover of DHL International Limited (DHL) marked a central milestone in our corporate strategy. Thanks to this acquisition, we can now reorganize our structures from the ground up.

We are doing this reorganization within the framework of our value creation program, STAR, which we announced at the end of October 2002. Under STAR, we are identifying the Group’s value reserves and developing concrete measures to increase them. Our main focus is on integrating our global networks. To this end, we will merge all European activities in the EXPRESS and LOGISTICS Corporate Divisions under the umbrella of the DHL brand in 2003. The goal is to combine the previously independent networks of DHL, Deutsche Post Euro Express and Danzas (overland transport and express) to create an efficient, high-performance transport and delivery system.

In the MAIL segment, we are systematically positioning ourselves to take advantage of the increasing deregulation of postal services in Europe: we expanded our mail activities in the Netherlands and were awarded a license for the British mail market in the year under review.

Postbank reinforced its strong position in the German retail banking sector and, at the same time, expanded its service offering for corporate customers.

Three external decisions adversely affected our operating environment in the year under review:

Firstly, the European Commission ruled in the state aid proceedings that Deutsche Post must repay the Federal Republic of Germany state aid of €572 million plus interest (total amount: €907 million). Although we immediately filed an appeal against this ruling, we were required to repay this amount at the beginning of 2003.

Secondly, the Regulierungsbehörde für Telekommunikation und Post (RegTP – Regulatory Authority for Telecommunications and Posts) established the general conditions for postal rates for mail products requiring approval. As a result, we may be obliged to implement annual price decreases or eligible to impose price increases in the period January 1, 2003 to December 31, 2007, depending on the rate of inflation. The mandatory price reductions that took effect for the most important mail products as of January 1, 2003 will depress our revenue and earnings by around €300 million a year throughout this period.

Finally, the Bundestag and the Bundesrat (the lower and upper houses of the Federal German parliament) approved an amendment to the Postgesetz (German Postal Act). This will reduce the weight and price limits of the statutory exclusive license to 100g and three times the standard rate, respectively, in an initial step as of 2003. At the same time, competitors were granted access to the market for outgoing cross-border mail services. In a second step, the weight limit will be lowered to 50g as of 2006. Our exclusive license will expire on December 31, 2007.

As part of STAR, we have plans to implement measures to close the earnings gaps resulting from these price cuts. As a whole, STAR demonstrates the Group’s strong commitment to value orientation. We have set ourselves the goal of increasing our profit from operating activities (EBITA) to €3.1 billion by the end of 2005.

In fiscal year 2002, we increased consolidated revenue by 17.6% to €39,255 million and the proportion of revenue generated internationally from 32.9% to 41.2%. This growth is primarily due to the first-time consolidation of DHL as of January 1, 2002. At €2,421 million, our profit from operating activities (EBITA) decreased 4.9% year-on-year.

Consolidated net profit declined from €1,577 million to €659 million. This reflects the European Commission’s state aid ruling, which necessitated the recognition of an extraordinary expense in the income statement and a liability under other liabilities in the balance sheet. Earnings per share fell correspondingly from €1.42 n 2001 to €0.59 in 2002; adjusted for the extraordinary expense, earnings per share totaled €1.41 in 2002.

Based on the Group’s operational earnings power, we feel we are in a position to continue to pursue our sound dividend policy and to distribute a dividend of €445 million to our shareholders, which corresponds to a dividend per share of €0.40.