Deutsche Post stock managed to outperform the market during most of H1/2002 despite the extremely harsh market environment. Although difficult conditions set in mid-year due to external factors, our share price nevertheless outperformed the DAX 30 during the year as a whole.

After receiving good initial valuations from the rating agencies, we successfully entered the debt capital markets in the autumn with our first bond.

1) Cashflow l
2) Adjusted for repayment of €907 million (see explanation further down)
3) Profit from ordinary activities less extraordinary expense/average equity
4) The Board of Management intends to propose this dividend to the Annual General Meeting
5) Based on year-end closing price

2002 was another disappointing year on the international stock markets. The recovery on the stock exchanges in the first quarter quickly proved to be little more than a flash in the pan. Recessive tendencies in the global economy, accounting scandals in the US and fears of a potential war against Iraq caused increasing uncertainty among investors in H2/2002. As a result, the major share indices hit a series of new multi-year lows throughout the year: in the period between January 1 and December 31, 2002, the DAX share index plunged 43.9% while the Euro STOXX 50 fell 37.3%. The Dow Jones Industrial Average also dropped 17.7% in the period under review.

Despite the worsening economic outlook, key interest rates in the US remained unchanged until October 6, 2002. On this date, the Federal Reserve Bank cut interest rates by 50 base points to 1.25%, the lowest level in 40 years. In contrast, the European Central Bank initially held the key interest rate stable until December 5 in order to ensure sufficient central bank money for the banking industry. In the end, however, the ECB also cut rates by 50 base points to 2.75%.

External factors interrupt trend towards outperformance
Deutsche Post stock performed broadly in line with the overall market in the year under review. Our share price proved particularly resistant in the first half of the year, getting off to a strong start and reaching a 52-week high of €17.48 on March 25, 2002. For the most part, our shares were able to outperform the DAX until mid-June.

Our share price came under additional pressure due to two negative external events in the summer: on July 10, 2002, the Regulierungsbehörde für Telekommunikation und Post (RegTP – Regulatory Authority for Telecommunications and Posts) announced its intended decision to decrease letter rates. The resulting drops in the Group’s revenue and earnings will total around €300 million a year between 2003 and 2007 for a cumulative sum of €1.5 billion. Investors were quick to react to this news: Deutsche Post stock lost approximately 10% of its value in the course of a single day.

We suffered a second setback with the European Commission’s state aid ruling on July 19. According to this ruling, Deutsche Post AG must repay the Federal Republic of Germany €907 million (including interest) in allegedly unjustified state aid. The announcement of this ruling led to yet another drop in our share price that could not be recouped in the period that followed. An upward trend only emerged with the announcement of the STAR program on October 31, 2002.

On the last day of trading in 2002, Deutsche Post stock closed at €10.00, which corresponded to a decrease of 33.3% since the beginning of the year. The shares of our Dutch competitor, TPG, slightly underperformed Deutsche Post stock during the year as a whole..

Stable shareholder structure
Deutsche Post AG’s share capital totals €1,112,800,000 and is composed of 1,112,800,000 no-par value registered shares.

As in the previous year, around one-third of the shares in free float are held by natural persons, while two-thirds are owned by legal entities and institutional investors based primarily in the UK, Germany and the US.

November 30, 2002 marked the expiration of the lock-up period for those private investors that subscribed to shares between October 30 and November 10, 2000 and were thus considered to be advance subscribers within the scope of our IPO; these investors are now entitled to bonus shares from the shareholdings of Kreditanstalt für Wiederaufbau (KfW) at a ratio of 1:15. The issuance of these bonus shares resulted in a 0.5% increase in the free float to 31.7% and a corresponding decrease in the proportion held by KfW to 18.3%.

Financial strength confirmed
The international rating agencies Moody’s, Standard & Poor’s and Fitch evaluated Deutsche Post World Net’s creditworthiness for the first time ever at the beginning of 2002. They issued above-average ratings, as shown in the following overview:

The rating analysts were particularly impressed with the Group’s solid financial structure and strong cash flow. All three agencies issued stable outlook ratings at the beginning of May and reconfirmed them in mid-2002 following the decision to lower letter rates and the ruling in the state aid proceedings. This will allow us to raise debt capital at attractive terms on the international capital markets.

Successful bond issue
As a result of our roadshow in eight European financial centers, our bond issue was more than five times oversubscribed.We also benefited from very attractive interest rates at the time of the issue. In order to accommodate the high level of interest among German and international investors, the originally planned total volume of €1 billion was increased to €1.5 billion and divided into two tranches of €750 million each. The tranches will run for different terms and carry different coupons, as shown in the following overview:

Further expansion of capital market communication
Particularly during difficult times on the stock exchanges, shareholders and lenders make increased demands on the companies they invest in. Transparency is crucial to developing trust, which is why we further expanded our activities in the area of capital market communication in 2002. We provided information on significant events at Deutsche Post World Net in numerous discussions and conference calls and at roadshows, press conferences and analyst conferences.

The results of an analysis performed by the magazine “Capital” in conjunction with the Deutsche Vereinigung für Finanzanalyse und Asset Management (DVFA –German Society of Investment Analysis and Asset Management) showed that we are on the right track. Fund managers and analysts evaluated the investor relations work of 238 European companies according to the criteria of credibility, quality and timeliness of reporting. Deutsche Post World Net placed fiftieth overall. In the future, we will continue to do everything in our power to report on our Company in an open and timely manner, and to ensure that our work lives up to the justifiably high expectations of investors and analysts.

The investor relations events scheduled for fiscal year 2003 can be found in the Financial Calendar of this report.