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Annual Report 2006
Building on our strategic strengths
Innovations for the success of our customers page 2
The personal commitment of our people page 12
Local strengths in a global network page 82
Stable basis for further growth page 102

Table of contents

  • Page 1
    Building on our strategic strengths Annual Report 2006 Innovations for the success of our customers page 2 The personal commitment of our people page 12 Local strengths in a global network page 82 Stable basis for further growth page 102

  • Page 2
    ...Choice program was launched throughout the Group. Our aim is to establish customer focus within our company in such a way that it generates profitable organic growth. In the mail business, we plan to gain a foothold in important markets around the globe, relying increasingly on value-added services...

  • Page 3
    ... in the Asia Pacific region and the Emerging Markets • Third largest provider of international express services in the USA www.dhl.com MAIL 2006 Workforce 1) EXPRESS 2006 Workforce 1) 129,922 over 39 million 3 million 2) 124,280 Private customers Business customers National items transported...

  • Page 4
    ... one in air and ocean freight worldwide • Global market leader in contract logistics • Number two in European overland transport www.dhl.com • Leading provider of financial services to private customers in Germany • Bank with the largest mobile sales force • Technology leader in payment...

  • Page 5
    ... interest in the Deutsche Postbank Group to 50% plus one share. 104 105 106 107 108 161 Income Statement Balance Sheet Cash Flow Statement Statement of Changes in Equity Notes Auditor's Report 162 Glossary 164 Index 165 Events and Contacts 8-Year Review Deutsche Post World Net Annual Report 2006

  • Page 6
    Innovations for the success of our customers

  • Page 7
    ... of benefit to our customers: They reduce their warehousing needs, save time and costs and give them the reassurance of always knowing where their goods are at any one time. Delivering life Logistics services for healthcare call for particular care. Here, DHL Exel Supply Chain is a highly...

  • Page 8
    ... wrapped up its integration project in September, three months earlier than planned. Our MAIL Division further increased its international reach. Thanks to the acquisition of Williams Lea, the leader in value-added services, we now hold a strong position in that market. One year before the complete...

  • Page 9
    ... than mail services. We are perfectly poised for the future. No logistics company is as big or as well represented worldwide as Deutsche Post World Net. Financial strength, familiar brands with a clear selling proposition, employees and executives with international expertise, and a global network...

  • Page 10
    ... per share to you at the Annual General Meeting in May, a full 7.1% above last year's already healthy dividend. Sustainable business practices are also a key part of our Group's strategy. Our Code of Conduct, which was introduced throughout the Group in the past year, stipulates important guidelines...

  • Page 11
    ...57% of our institutional investors are now from these two countries. The Group Our stock data 2004 Year-end closing price High Low Number of shares Market capitalization Average trading volume per day Annual performance with dividend Annual performance excluding dividend Beta factor2) Earnings per...

  • Page 12
    ... system was 5,287,529 shares - an increase of 40.7% on the prior year. A total return calculator is available on our website, allowing you to determine how much profit your shares have actually made including dividend payments. http://investors.dpwn.com Deutsche Post World Net Annual Report 2006

  • Page 13
    ... restructured our report this year in line with new statutory requirements. Information on dividend and equity changes and on our ownership structure is now contained in the Group Management Report. The outcomes of this year's Annual General Meeting are covered in the Corporate Governance section...

  • Page 14
    ... Air Cargo Worldwide. The agreement signed has a term of 20 years and guarantees DHL long-term access to air freight capacities on trans-Pacific routes. November Williams Lea takes over The Stationery Office, the market leader in public-sector printing services and document management in the UK...

  • Page 15
    ... attractive for private customers. September Williams Lea opens a 6,500m2 center for mail and document solutions in Norwich in the UK with an approximately 400-strong workforce. October The topping-out ceremony takes place at DHL's new European air hub at Leipzig/Halle airport. With a total area of...

  • Page 16
    The personal commitment of our people

  • Page 17
    ... and skills to deliver shared service excellence. Group Management Report Individual strengths For us, every idea counts. The in-house "Thinkers' Club" has been in existence for six years. Its aim is to promote the exchange of ideas among employees and jointly develop new approaches. Ralph Müller...

  • Page 18
    ...7.1 3.5 Revenue by segment1) 6.1% SERVICES 19.9% MAIL 14.3% FINANCIAL SERVICES Revenue by region 9.2% Asia Pacific 18.4% Americas 41.0% Germany 1.6% Other regions 25.7% EXPRESS 1) Excluding consolidation. 34.0% LOGISTICS 29.8% Other European countries Deutsche Post World Net Annual Report 2006

  • Page 19
    ...Employees Group Management Report 63 Sustainability 65 Risk Management 74 74 74 75 78 79 80 Further Developments and Outlook Events after the close of the fiscal year Future conditions Future business Expected business development Further development of the Group Opportunities Deutsche Post World...

  • Page 20
    ... and information. Between 2006 and 2009, we have set our sights on using this platform even more effectively and profitably. The lever by which we aim to achieve it: quality!" Dr. Klaus Zumwinkel, Chairman of the Board of Management Strategic strengths Customers First Choice Most of our business...

  • Page 21
    ... customer requirements all the time. Here, we pay special attention to the intercontinental air express business - one of the most attractive segments in which we operate. In the coming years, DHL will strengthen its leading position on the route between Europe and Asia and expand overnight delivery...

  • Page 22
    ...Post World Net provides national and international services in five divisions under three brand names. As a German stock corporation, Deutsche Post has a dual management and supervisory structure. The Group is managed by the Board of Management whose members are appointed for a maximum of five years...

  • Page 23
    ...US mail market, value: â,¬53.6bn3) Asia • CEP market2), value: â,¬21.2bn As of 2005 1) Twenty-foot equivalent units. 2) Courier, express and parcel services. 3) Company estimates. 4) Including Germany, the UK, France, the Netherlands, Italy, and Spain. Deutsche Post World Net Annual Report 2006

  • Page 24
    ... increase. The healthy economy helped the stock markets post strong gains yet again in 2006. Share prices rose in line with corporate profits. The DAX was up 22%, outperforming by a wide margin the EURO STOXX 50 index, which gained 15.1%, and the S&P 500 (13.6%). On average, long-term interest rates...

  • Page 25
    ... institute Global Insight. In the European economies, consumer goods from Asia were in even greater demand than before. The USA continues to labor under enormous fiscal and trade deficits, but remained the world's largest importer. In terms of 1997 commodity prices, China has overtaken Germany to...

  • Page 26
    .... These two factors resulted in a slight decline in our market share; however, it still remains at approximately 90%. The mail market is still regulated, as we describe in the risk report. 89.5% Deutsche Post Source: company estimates Starting on page 65 Deutsche Post World Net Annual Report 2006

  • Page 27
    ... a global network for the international transfer of data and business process outsourcing. Our domestic business for value-added services will also benefit from the know-how of the world market leader in the three areas of document management, financial process management and customer management. We...

  • Page 28
    ... the domestic markets of other countries and provide value-added services. We serve business customers in key national mail markets, including the USA, the Netherlands, the UK, Spain, and France and we are the first foreign company to operate in the Japanese mail market. In the year under review, we...

  • Page 29
    ... services, we are bundling products from various business units, ranging from individual services to the performance of a company's entire business processes. For example, under the Williams Lea brand we offer our customers outsourcing solutions for document management and corporate information...

  • Page 30
    ... in terms of delivery reliability. Now operating in a unified management structure, we believe we are well placed to grow our business in the next years." John P. Mullen, EXPRESS Regions and products Europe Americas Asia Pacific Emerging Markets • Same Day • Time Definite • Day De...

  • Page 31
    ...and services in the USA is also a guarantee of long-term business success in other regions. In the USA, we operate an air and ground-based transport network through which we move all domestic and international shipments, with domestic express products accounting for more than 90% of the total market...

  • Page 32
    ... it in Asia. That means we are now also active in the major economic hubs in the area of time-critical express shipments. Today, over half a million registered customers in Germany can send and pick up parcels using a machine 24 hours a day at our 720 Packstations in 120 cities and communities, thus...

  • Page 33
    ... which serve to underline the company's appeal to customers and employees alike. The most important are: "Best Express Operator of the Year Award" in Asia "International Express Operator of the Year Award" in the UK "Best Call Center Award" for DHL-Sinotrans in China "Userware Award" for the...

  • Page 34
    ... Business units and products DHL Global Forwarding DHL Exel Supply Chain DHL Freight • Air freight • Ocean freight • Industrial projects • Contract logistics • Ground-based transportation • Value-added services • Full truckload • Less than truckload • Specialities Number...

  • Page 35
    ... develop customized programs such as integrated order management. Market leader in contract logistics In our DHL Exel Supply Chain Business Unit, we provide warehousing and groundbased transportation services. These services are mostly performed on the basis of long-term contracts, hence the term...

  • Page 36
    ... the DHL website, to which all employees and customers now have access. We have set up dedicated account management teams for key customers. In all regions and sectors, we have renewed existing contracts and gained new business. We received several awards for our services in 2006, the most important...

  • Page 37
    ... and achieve economies of scale. In contract logistics, we aim to continually improve warehouse infrastructure and productivity. In European overland transport, the goal is for the DHL brand to increase market penetration while boosting earnings power. Deutsche Post World Net Annual Report 2006

  • Page 38
    ... market and capital market investments • Risk management • Asset management The FINANCIAL SERVICES Division consists primarily of Postbank as well as the Pension Service. Following Postbank's acquisition of 850 retail outlets from Deutsche Post AG at the beginning of the year, we now report...

  • Page 39
    ... money market and capital market transactions. The bank invests its liquid funds in financial markets and manages the market price risk, particularly the interest rate risk. Sales channels as a competitive advantage The bank's highly diverse sales channels make it easily accessible to its customers...

  • Page 40
    ..., and completing the necessary groundwork for the launch of the SEPA (Single Euro Payment Area) payment system. Postbank's goal is to become a leading financial services provider for private customers and a service partner of choice for companies. Deutsche Post World Net Annual Report 2006

  • Page 41
    ... as a new board department in January 2006 to provide internal services to all divisions. With a worldwide workforce of approximately 13,000 employees, GBS supports the Group in the following areas: Law, Insurance, Procurement, Finance Operations, IT Services, Real Estate, Fleet Management, Business...

  • Page 42
    ..., complementing the existing regions of Germany, Americas, Emerging Markets, Asia Pacific and Europe. Pooling the procurement requirements of Deutsche Post World Net and Exel has yielded synergies. For example, we issued a new worldwide call for tenders to meet our needs for temporary staff and...

  • Page 43
    ... early stage and arrange suitable corrective measures with the suppliers. This review process also takes into account whether the suppliers are meeting our ethical and ecological standards. Research and development As a pure service provider, Deutsche Post World Net does not engage in research and...

  • Page 44
    ... previous years, we are again reporting economic profit in addition to the EBIT performance indicator as part of our value-based Group management. With economic profit, we measure the value we create for our shareholders from operations, taking into account the total cost of capital used to generate...

  • Page 45
    ... Profit from operating activities (EBIT) Return on sales 1) 2006 60,545 3,872 6.4 1,916 1.60 +/-% 35.8 2.9 â,¬m â,¬m % â,¬m â,¬ 44,594 3,764 8.4 2,235 1.99 Consolidated net profit excluding minorities Earnings per share 1) EBIT/revenue. -14.3 -19.6 Deutsche Post World Net Annual Report 2006

  • Page 46
    ....0 44.6 Consolidated revenue increases for the sixth year in succession In fiscal year 2006, consolidated revenue and income from banking transactions rose by 35.8% in total to â,¬60,545 million (previous year: â,¬44,594 million). Acquisitions such as Exel, BHW and Williams Lea contributed to the...

  • Page 47
    ...December 31, 2006, the net dividend yield is therefore 3.3%. The dividend will be disbursed on May 9, 2007. As in previous years, it is tax-free for shareholders resident in Germany. Total dividend and dividend per no-par value share â,¬m 902 836 Consolidated EBIT â,¬bn 3.8 Group Management Report...

  • Page 48
    ... of which Mail Communication Direct Marketing Press Distribution Mail International/Value-added Services Internal revenue EXPRESS revenue of which Europe Americas Asia Pacific Emerging Markets (EMA) Consolidation LOGISTICS revenue of which DHL Global Forwarding DHL Freight DHL Exel Supply Chain...

  • Page 49
    ... to higher revenue from the international mail business, the factors contributing to this included increased productivity and our cost management initiatives. Our return on sales amounted to 15.5%, again reaching the high level of the previous year. Deutsche Post World Net Annual Report 2006

  • Page 50
    ...is under way in the USA. In Europe, we succeeded in further improving our earnings. The operating results from countries other than Germany compensated for the dip in earnings in the German parcel business. Return on sales in the express business was 1.9%. Deutsche Post World Net Annual Report 2006

  • Page 51
    ... previous year to â,¬11,957 million in 2006. Exel's business provided a major boost in contract logistics. The result was a sharp increase in revenue across nearly all sectors, as shown by the table on the following page. As Exel leads the key fast-moving consumer goods markets, the largest absolute...

  • Page 52
    ... Exel. This includes an expected return on plan assets of â,¬235 million, which is related to pension obligations. Return on sales was 3.4% compared with 3.5% in the previous year. Postbank increases income and profit At the turn of the year, Postbank acquired 850 retail outlets from Deutsche Post...

  • Page 53
    ... end of the previous year. Deutsche Postbank AG provides details of its business development in 2006 in its own annual report, published on March 19, 2007. Revenue growth for SERVICES On January 1, 2006, we created a new SERVICES segment. This includes internal services throughout the Group, which...

  • Page 54
    ... the acquisition of this interest, we are expanding both our international presence and our range of value-added services. • As announced in November 2006, Williams Lea acquired 100% of the shares in the UK company The Stationery Office, the public-sector leader in print and document management...

  • Page 55
    ...million). Intangible assets increased by â,¬1,626 million to â,¬14,652 million due to the first-time consolidation of companies, including BHW and Williams Lea. Property, plant, and equipment fell by 5.2% to â,¬9,388 million (previous year: â,¬9,908 million). At the end of the year, Deutsche Post AG...

  • Page 56
    ... and noncurrent provisions increased by 17.0% to â,¬14,233 million. The increase of â,¬378 million in pension provisions relates mainly to the acquisition of BHW. Other provisions increased by â,¬1,871 million, also primarily as a result of acquisitions. Deutsche Post World Net Annual Report 2006

  • Page 57
    ... The Annual General Meeting in May 2006 also renewed the global authorization allowing the Board of Management to acquire own shares amounting to up to a total of 10% of the share capital. No use has yet been made of this authorization. Shareholder structure As expected, our largest shareholder, KfW...

  • Page 58
    ..., cash and cash equivalents for the Group excluding Postbank increased by â,¬377 million in fiscal year 2006. As of December 31, 2006, cash and cash equivalents therefore amounted to â,¬1,761 million, compared to â,¬1,384 million as of December 31, 2005. Deutsche Post World Net Annual Report 2006

  • Page 59
    ... long-term deposits and financial liabilities to minority shareholders of Williams Lea. Net debt was reduced from â,¬4,193 million to â,¬3,083 million which was due in particular to calling the exchangeable bond. Group Management Report At the same time, the ratio of net debt to the total of equity...

  • Page 60
    56 Balance sheet structure (Postbank at equity) 2005 restated as of December 31 ASSETS Intangible assets Property, plant, and equipment Investment property Noncurrent financial assets Other noncurrent assets Deferred tax assets Noncurrent assets 12,804 9,155 35 4,186 373 521 27,074 34.4 24.6 0.1 ...

  • Page 61
    ... a service center, and in Thailand it is building an express hub at Bangkok Airport. In Hong Kong, we expanded our Asia Pacific air hub at the international airport there, and in India we invested in our national air fleet (Blue Dart). In the LOGISTICS Division, we invested mainly in the DHL Exel...

  • Page 62
    ... cost of capital and benefit from economies of scale and specialization, external financing measures, Group-wide finance and liquidity management, and the hedging of interest rate, currency and commodity price risks are all coordinated centrally. To limit these financial risks, the Group makes use...

  • Page 63
    ... the exchangeable bond for Postbank stock until July 24. Following this transaction, Deutsche Post's interest in Postbank stands at 50% plus one share. Information on Deutsche Post's other bonds is contained in the Notes. Group Management Report Note 44 Deutsche Post World Net Annual Report 2006

  • Page 64
    ... In the MAIL Division, the number of employees grew by 3.7% to 129,922 as a result of the acquisition of Williams Lea along with its 6,600 employees. The lower net increase of just 4,640 employees was due to our efforts to further optimize workflows and the fact that the weekly working hours of mail...

  • Page 65
    ... completed the program. Worldwide adoption of our corporate values We have made excellent progress in the worldwide introduction of our seven corporate values. Most of the workshops on this topic planned for the MAIL and Group Management Report Deutsche Post World Net Annual Report 2006

  • Page 66
    ... prizes: the "dib Wissenschaftspreis" (dib Science Award), the "International Award" for an idea for the cost-effective de-icing of DHL airplanes, and "Best Inventor Team" for a patent on a partially automated method for facilitating the sorting of mail. Deutsche Post World Net Annual Report 2006

  • Page 67
    ...then leverage the talents of our employees. To this end, Deutsche Post World Net has set up an internal talent pipeline that is a key tool for succession planning and providing support for hiring from within the company to fill vacant positions. Information is collected on the performance, potential...

  • Page 68
    ... outlets since August 2006. The emissions associated with mailing this package are offset by climate-protection projects. In January 2007, we also began offering climate-neutral express delivery services to business customers in Europe. Our first international customer was the World Economic Forum...

  • Page 69
    ... services is growing as a result. This presents diverse opportunities for Deutsche Post World Net. At the same time, globalization stokes fiercer competitive rivalry with market players new and old throughout the world. Note 52.1 Group Management Report Deutsche Post World Net Annual Report 2006

  • Page 70
    ... now rule on the proposed directive using the co-decision procedure. While the deregulation of the postal markets entails risks for Deutsche Post AG due to increased competition in Germany, the deregulation of other European mail markets opens up new opportunities. The Postgesetz (German Postal Act...

  • Page 71
    ... on customers, new products and further internationalization of our mail business. International expansion of the EXPRESS Division is a cornerstone of our company's future success. Becoming our customers' preferred provider means fine-tuning our global standardized business processes to meet diverse...

  • Page 72
    ... business. The loss of major customers due to aggressive competition or, for instance, due to bankruptcy is a constant risk facing logistics service providers. While this risk can be limited by far-sighted management, it cannot be entirely neutralized. Deutsche Post World Net Annual Report 2006

  • Page 73
    ... information technology at centrally located data centers in three time zones around the world, each operating independent IT risk management systems, to prevent outages or to contain the effects of business interruptions when they do occur. Group Management Report Deutsche Post World Net Annual...

  • Page 74
    ... the Group's key currency blocks in euros and US dollars. Based on this information, primary and derivative financial instruments are used to reduce financing costs and manage interest rate risks by adjusting the remaining maturity of the overall position. Deutsche Post World Net Annual Report 2006

  • Page 75
    ... Postbank AG to use Deutsche Post outlets at belowmarket rates. In our opinion, the fee paid by Postbank complies with the provisions on competition and state aid stipulated in European law. The European Commission is also asking the Federal Republic of Germany to comment on the sale of its entire...

  • Page 76
    ... the airport comply with the law relating to state aid. It cannot be ruled out, however, that the European Commission will deem specific features of these arrangements to be unlawful. This could result in additional costs for DHL in operating the air hub. Deutsche Post World Net Annual Report 2006

  • Page 77
    ... past fiscal year, there were no identifiable risks for the Group which, individually or collectively, cast significant doubt upon the company's ability to continue as a going concern. Nor are any such risks apparent in the foreseeable future. Group Management Report Deutsche Post World Net Annual...

  • Page 78
    ... after the close of the fiscal year DHL boosts Hong Kong investments On January 18, 2007, we announced a further US$35 million investment in Hong Kong. The investment project includes a corporate headquarters building and a logistics center in South Kowloon, which will increase DHL EXPRESS' ground...

  • Page 79
    ... on value-added services in the mail business. In 2007, Williams Lea will enable us to strengthen our standing as one of the top international providers of outsourcing solutions for document and corporate information management in the USA, Europe and Asia. At the same time, we will increase our...

  • Page 80
    ... to perceive us as the friendliest, most accessible and responsive express and logistics provider on the market. To achieve this, we will continue to respect our customers' wishes, provide user-friendly technology and boost our domestic product range. Deutsche Post World Net Annual Report 2006

  • Page 81
    ...in the region, develop high-quality products and services and continue to invest in technology, infrastructure and human resources. As part of our investment program, we will, among other measures, expand our Central Asian Hub in Hong Kong, develop a North Asia Hub which will be in place by 2008 and...

  • Page 82
    ... million new customers for the first time. The successful integration of BHW and the retail outlets acquired from Deutsche Post have provided Postbank with a stronger base for selling its services and created the conditions for further organic growth. The considerably expanded sales platform is used...

  • Page 83
    ...to increase our payout ratio for fiscal 2007 to around 50% (dividend payment in 2008). Further development of the Group Future organization In 2007, we will review our human resources management activities to determine whether human resources operations functions can be organized as shared services...

  • Page 84
    ... strategy opportunities Our goal is to become the world's preferred logistics service provider. Our First Choice quality program represents our effort to increase customer loyalty in the competitive logistics market and to also attract new customers. The Deutsche Post, DHL and Postbank brands stand...

  • Page 85
    ... is providing Postbank with increased access to its private customers. Sales channels such as phone banking and the Internet are being improved further. Postbank aims to increase its selling power and gain market share. Other opportunities The SERVICES Division, which consolidates internal services...

  • Page 86
    Local strengths in a global network

  • Page 87
    ... our biggest new construction project. The site of the hub is ideally linked to the road, air and rail network and permits 24-hour operations. Corporate Governance Strategic alliances Deutsche Post World Net was the first international provider to succeed in entering the Japanese mail market. We...

  • Page 88
    ... into the Group. In the EXPRESS Division, DHL secured long-term access to air freight capacity on trans-Pacific routes through the acquisition of a minority stake in Polar Air Cargo Worldwide, Inc. In November, the Group's company Williams Lea acquired the British company The Stationery Office, thus...

  • Page 89
    ... with the 2006 German Corporate Governance Code was also approved. Supervisory Board committees working efficiently The Executive Committee met four times during the year under review. Agenda items included Board of Management issues and the further development of the company's corporate governance...

  • Page 90
    ...Supervisory Board reviewed the annual and consolidated financial statements and the management reports for fiscal 2006 at today's plenary meeting. The auditor's reports were made available to all Supervisory Board members and were intensively discussed at the meeting with the Board of Management and...

  • Page 91
    ...for inspection on the company's website and in its offices beginning when the Annual General Meeting is convened, and will also be available to shareholders at the Annual General Meeting. The Supervisory Board has reviewed the information and the report by the Board of Management. The results of the...

  • Page 92
    ... Corporate Governance Report on page 94. We would like to thank the Board of Management and all employees of the Group for their commitment and successful efforts in fiscal year 2006. Bonn, March 13, 2007 The Supervisory Board Dr. Jürgen Weber Chairman Deutsche Post World Net Annual Report 2006

  • Page 93
    ... 10, 2006) Managing Director, E Toime Consulting Ltd. Employee representatives Rolf Büttner Deputy Chair Member of the National Executive Board of ver.di Frank von Alten-Bockum Managing Director, Deutsche Post AG Marion Deutsch Deputy Chair of Works Council, Deutsche Post AG, Mail Branch, Saarbr...

  • Page 94
    ..., member of the Board of Management since 1992, appointed until November 2010, responsible for finance including Controlling, Corporate Accounting and Reporting, Investor Relations, Corporate Finance, Corporate Internal Audit/Security, as well as Taxes. Deutsche Post World Net Annual Report 2006

  • Page 95
    .... Corporate Governance Fiscal year 2006 Dr. Klaus Zumwinkel, Chairman John Murray Allan, LOGISTICS Dr. Frank Appel, Global Business Services Prof. Dr. Edgar Ernst, Finance Dr. Peter E. Kruse (until September 22, 2006), EXPRESS Europe John P. Mullen, EXPRESS Americas, Asia, Emerging Markets (until...

  • Page 96
    ... 4, 2006) • Deutsche Post Immobilienentwicklung GmbH1) (Advisory Board, Chair until April 4, 2006) • Global Mail Inc. USA1) (Advisory Board, Chair until March 29, 2006) • Williams Lea Holdings plc1) (Chairman of the Board of Directors since March 24, 2006) • Williams Lea Group Ltd.1) (Board...

  • Page 97
    ... Wendt • Bundesanstalt für Post und Telekommunikation (Administrative Board, until Feb. 1, 2006) Corporate Governance • Membership of supervisory boards required by law • Membership of comparable supervisory bodies of German and foreign companies Deutsche Post World Net Annual Report 2006

  • Page 98
    94 Corporate Governance Report Deutsche Post AG has treated corporate governance as a high priority for years. We attach particular importance to achieving a sustained increase in enterprise value and to building the trust of investors, customers and employees in the company's management. Unquali...

  • Page 99
    ... reports are published. Other information available relates to our stock, to the share price and to the purchase or sale of the company's shares or related financial instruments pursuant to Section 15a of the Wertpapierhandelsgesetz (German Securities Trading Act). Members of the Board of Management...

  • Page 100
    ... in fiscal year 2006 with a total value of â,¬6.38 million at the time of issue (July 1, 2006). The remuneration was broken down as shown in the following table and covers all activities of the members of the Board of Management within the Group. Note 36 Deutsche Post World Net Annual Report 2006

  • Page 101
    ... and the closing price of the Deutsche Post stock on the last trading day before the SAR is exercised. As in the past, the members of the Board of Management must each personally invest 10% of their annual target salary in Deutsche Post stock. The number of SARs issued to the members of the Board of...

  • Page 102
    ... or 60 years of age in the case of John P. Mullen. The Board of Management members can choose between ongoing old age benefits and a lump sum. The amount of the benefits is graduated according to the pensionable earnings and the number of years of service. Deutsche Post World Net Annual Report 2006

  • Page 103
    ... The remuneration for former members of the Board of Management or their surviving dependents amounted to â,¬1.95 million in the year under review. The defined benefit obligations (DBO) for current pensions calculated under IFRSs amount to â,¬16.8 million. Deutsche Post World Net Annual Report 2006

  • Page 104
    ...Supervisory Board or committee meeting. In fiscal year 2006, the total remuneration of the Supervisory Board, excluding long-term performance-related remuneration, amounted to approximately â,¬1 million. The following table provides a breakdown as follows: Deutsche Post World Net Annual Report 2006

  • Page 105
    ...return for services provided individually above and beyond activities for the Supervisory Board, especially consulting and agency services, with the exception of the remuneration of members elected by employees as set out in the members' respective employment contracts. Stock holdings and reportable...

  • Page 106
    Stable basis for further growth

  • Page 107
    ... night. In the USA, DHL has attained a competitive quality standard that meets our customers' performance requirements. Sharing a piece of the pie Consolidated Financial Statements We're happy to share our success - especially with our shareholders. We regard the trust they place in us as a kind...

  • Page 108
    ...costs Net finance costs Profit before income taxes Income tax expense Consolidated net profit for the period attributable to Deutsche Post AG shareholders... share Diluted earnings per share 1) Prior-period amounts restated, see Note 5. 21 21 1.99 1.99 Deutsche Post World Net Annual Report 2006

  • Page 109
    ... financial services Financial instruments Cash and cash equivalents Current assets Total assets EQUITY AND LIABILITIES Issued capital Other reserves1) Retained earnings1) Equity attributable to Deutsche Post AG shareholders Minority interest1) Equity Provisions for pensions and other employee bene...

  • Page 110
    ...in companies Other noncurrent assets -4,135 -2,041 -6,176 Interest received Current financial instruments Net cash used in investing activities Change in financial liabilities1) Dividend paid to Deutsche Post AG shareholders Dividend paid to other shareholders Issuance of shares under stock option...

  • Page 111
    ...(38) Minority interest (40) Total equity Balance at January 1, 2005 before adjustment Adjustments Balance at January 1, 2005 after adjustment1) Capital transactions with owner Issuance of shares - Exel acquisition Dividend Stock option plans (exercise) Stock option plans (issuance) 1,113 0 1,113...

  • Page 112
    ... of accounting 3 Consolidated group In addition to Deutsche Post AG, the consolidated financial statements for the period ended December 31, 2006, generally include all German and foreign operating companies in which Deutsche Post AG directly or indirectly holds a majority of voting rights, or...

  • Page 113
    ... 24, 2006 September 30, 2006 326 2 Purchased Increase in equity interest MAIL Measurement of goodwill â,¬m March 31, 2006 Williams Lea As of March 24, 2006, Deutsche Post World Net acquired 66.15% of the shares in Williams Lea Group Ltd., London, UK (Williams Lea). The purchase price increased by...

  • Page 114
    ... â,¬2.2 billion were spent on acquisitions in fiscal year 2006 (previous year: â,¬6.0 billion). The purchase prices of the acquired companies were paid by transferring cash and cash equivalents. Further details about cash flows can be found in Note 51. Deutsche Post World Net Annual Report 2006

  • Page 115
    ...in use of the DHL Freight Business Unit and the remaining part of the cash-generating unit, and transferred to the new DHL Freight Business Unit. Bundes-Pensions-Service für Post und Telekommunikation e.V. (BPS-PT) Based on the changes in the method for calculating the contributions for prior years...

  • Page 116
    ... been examined for a lease in connection with IFRIC 4: • Service agreements with American air freight companies that handle express business in the USA for Deutsche Post World Net. • IT agreement with a service provider; additional information can also be found under Note 56. Aircraft (finance...

  • Page 117
    ... of â,¬272 million (previous year: â,¬220 million) resulted from currency translation differences. In contrast, currency translation differences relating to net investments in a foreign operation are recognized in equity. Consolidated Financial Statements Deutsche Post World Net Annual Report 2006

  • Page 118
    ... are expensed directly. Value-added tax arising in conjunction with the acquisition or production of items of property, plant or equipment is included in the cost if it cannot be deducted as input tax. Depreciation is generally charged using the straight-line method. Deutsche Post World Net uses the...

  • Page 119
    ... method. Inventories Finished goods and goods purchased and held for sale are carried at the lower of cost or net realizable value. Valuation allowances are charged for obsolete inventories and slow-moving goods. Consolidated Financial Statements Deutsche Post World Net Annual Report 2006

  • Page 120
    ...tax assets and liabilities are calculated by using the tax rates applicable in the individual countries at the balance sheet date or announced for the time when the deferred tax assets and liabilities are realized. The tax rate of 39.9% applied to German Group companies comprises the corporation tax...

  • Page 121
    ... companies are eliminated. Intercompany profits or losses from intragroup deliveries and services not realized by sale to third parties are eliminated. 9 Segment reporting Segments by division January 1 to December 31 MAIL â,¬m 2005 2006 EXPRESS1), 2) 2005 2006 LOGISTICS1), 2) 2005 2006 FINANCIAL...

  • Page 122
    ...: Mail Communication, Direct Marketing, Press Distribution, Value-added Services and Mail International. EXPRESS The EXPRESS Division offers national and international courier, express and parcel services (DHL EXPRESS) under the DHL brand. Effective July 1, the European overland transport business...

  • Page 123
    ..., and equipment. Depreciation, amortization, and write-downs relate to the segment assets allocated to the individual divisions. Other non-cash expenses relate primarily to expenses from the recognition of provisions. Consolidated Financial Statements Deutsche Post World Net Annual Report 2006

  • Page 124
    ...22,245 million, in particular due to acquisition of the Exel Group in fiscal year 2005. The EXPRESS segment contributed â,¬16,587 million to revenue. The revenue contribution from Williams Lea, which was consolidated for the first time in the year under review, was â,¬559 million (see Note 3). The...

  • Page 125
    ... to supplementary occupational pension plans and retirement benefit payments by employers for their employees. The average number of employees of Deutsche Post World Net in the year under review, classified by employee groups, was as follows: Employees 2005 2006 The increase in materials expense...

  • Page 126
    ... provisions. 1) Prior-period amount restated, see Note 5. The increase in other operating expenses is primarily attributable to the firsttime consolidation of the Exel Group. Miscellaneous other operating expenses include a number of individual items. Deutsche Post World Net Annual Report 2006

  • Page 127
    ... (KStG - German Corporate Income Tax Act) relate primarily to the effect from the exchangeable bond at Deutsche Post AG, as well as to special funds, shares, and equity investments of the Deutsche Postbank Group. A dividend per share of â,¬0.75 is being proposed for fiscal year 2006. Based on the...

  • Page 128
    ... internally developed software. The increase in purchased intangible assets is related to the customer lists and brand names identified during the purchase price allocation with Exel, BHW, and Williams Lea. They developed as follows during the fiscal year: Deutsche Post World Net Annual Report 2006

  • Page 129
    ... â,¬30m MAIL International â,¬1,011m DHL Global Forwarding â,¬3,134m DHL Exel Supply Chain â,¬2,071m DHL Freight Europe â,¬253m FINANCIAL SERVICES â,¬634m 1) Goodwill from reconciliation amounts to â,¬-114 million. Consolidated Financial Statements Deutsche Post World Net Annual Report 2006

  • Page 130
    ... equipment Technical equipment and machinery Other equipment, operating and office equipment Vehicle ï¬,eet and transport equipment Advance payments, assets under development â,¬m Land and buildings Aircraft Total Historical cost Opening balance at January 1, 2005 Changes in consolidated group...

  • Page 131
    ... advance payments on items of property, plant, and equipment where Deutsche Post World Net has paid advances in connection with uncompleted transactions. Assets under development relate to items of property, plant, and equipment in progress at the balance sheet date for whose production internal or...

  • Page 132
    ... rate swaps/fair value hedges - relate to bonds issued by Deutsche Post Finance, the Netherlands, and were entered into with external banks. Further information on pension assets can be found in Note 41. 28 Deferred tax assets Deferred tax assets â,¬m 2005 2006 Deferred tax assets from tax loss...

  • Page 133
    ... to take place at the beginning of 2007. The Cologne-based waste management service provider was acquired by Deutsche Post as part of its 2005 acquisition of Exel and was not considered to be part of the Group's German core business. The companies McPaper and DP Wohnen were sold in January 2006...

  • Page 134
    ... pools Receivables from insurance business Receivables from loss compensation (recourse claims) Receivables from sales of assets Receivables from BAnstPT (Federal Posts and Telecommunications Agency) Receivables from private postal agencies Receivables from Bundes-Pensions-Service e.V. Miscellaneous...

  • Page 135
    ... continue to be reported as noncurrent financial assets. Impairment losses of â,¬3 million (previous year: â,¬7 million) were recognized in fiscal year 2006 to reflect developments in the values of financial instruments. Consolidated Financial Statements Deutsche Post World Net Annual Report 2006

  • Page 136
    ... resolution of the Annual General Meeting. Deutsche Post AG did not hold any own shares as of December 31, 2006. Share-based remuneration system for executives Authorized capital The 2005 authorized capital replaces the authorization of the Board of Management to increase the share capital by up to...

  • Page 137
    ... Consolidated Financial Statements Unexercised options from tranche 2001 lapsed without compensation following the expiration of the exercise period on March 15, 2006. Starting in fiscal year 2002, the SOP has been measured using investment techniques by applying option pricing models (fair value...

  • Page 138
    ... respective closing price of Deutsche Post stock on the previous day and the fixed issue price, if demanding performance targets are met. Board of Management LTIP 2006 A successor plan was also launched for members of the Board of Management: Under the 2006 Long Term Incentive Plan (LTIP), members...

  • Page 139
    ...employees, taking into account changes in key parameters. The majority of the defined benefit plans in Germany relate to Deutsche Post AG. In the UK, significant liabilities were acquired as part of the Exel plc acquisition in December 2005. The defined benefit liabilities of Deutsche Postbank Group...

  • Page 140
    ...was determined by taking into account current long-term rates of return on bonds (government and corporate) and then applying to these rates a suitable risk premium for other asset classes based on historical market returns and current market expectations. Deutsche Post World Net Annual Report 2006

  • Page 141
    ...) 2005 Deutsche Postbank Group 2006 Deutsche Postbank Group â,¬m Germany UK Other Total Germany UK Other Total Present value of defined benefit obligations at January 1 Service cost, excluding employee contributions Employee contributions Interest cost Benefit payments Past service cost...

  • Page 142
    ... Postbank Group 2006 Deutsche Postbank Group â,¬m Germany UK Other Total Germany UK Other Total Fair value of plan assets at January 1 Employer contributions Employee contributions Expected return on plan assets Gains (+)/losses (-) on plan assets Pension payments Transfers Acquisitions...

  • Page 143
    ...to pension funds). Pension expense Pension expense1) 2005 Deutsche Postbank Group 2006 Deutsche Postbank Group â,¬m Germany UK Other Total Germany UK Other Total Current service cost, excluding employee contributions Interest cost Expected return on plan assets Recognized past service cost...

  • Page 144
    ... Service Health Insurance Fund was strengthened. On the one hand, the Deutsche Bundespost successor companies have set up a compensation fund to finance the costs of winding down the fund. On the other hand, the linking of increases in contributions to the average development of costs in the general...

  • Page 145
    ...1,856 118 73 62 2,936 5,900 1,945 178 110 73 Consolidated Financial Statements 184 2,950 5,440 The following table contains further details on the company's bonds. The bonds issued by Deutsche Post Finance B.V. are fully guaranteed by Deutsche Post AG. Deutsche Post World Net Annual Report 2006

  • Page 146
    ... AG Deutsche Post International B.V., Netherlands Exel Group DHL Operations B.V., Netherlands Other Group companies 2,350 1,240 478 451 410 971 5,900 2,286 1,040 335 233 419 1,127 5,440 Differences between fair values and carrying amounts result from changes in market interest rates for financial...

  • Page 147
    ...year: â,¬973 million) and Exel (â,¬1,278 million; previous year â,¬1,454 million). Trade payables primarily have a maturity of less than one year. The reported carrying amount of trade payables corresponds to their fair value. Consolidated Financial Statements Deutsche Post World Net Annual Report...

  • Page 148
    ... shows the maturity structure for liabilities from financial services: Maturity structure 2006 â,¬m Payable on demand Less than 3 months 3 months to 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Total Deposits from other banks Due to customers Securitized liabilities...

  • Page 149
    ... months, and correspond to the cash and cash equivalents reported on the balance sheet. The effects of currency translation and changes in the consolidated group are adjusted when calculating cash and cash equivalents. Consolidated Financial Statements Deutsche Post World Net Annual Report 2006

  • Page 150
    ... Postbank Group, primarily the Financial Markets board department, Domestic/Foreign Credit Management and the credit functions of the private customer business and, at a decentralized level, the subsidiaries BHW Bausparkasse AG, BHW Bank AG, Deutsche Postbank International S. A. and PB Capital Corp...

  • Page 151
    ... in the economy as a whole. In fiscal year 2006, the Deutsche Postbank Group enhanced the structures, instruments, and processes for risk management and controlling for the relevant risk categories and has state-of-the-art tools for overall bank management. The new BHW AG group units acquired in the...

  • Page 152
    ...,568 481,812 3,092 639 3,731 3,289 485 3,774 3,341 1,668 5,009 3,616 958 4,574 The following table presents the open interest rate and foreign currency forward transactions and option contracts of the Deutsche Postbank Group at the balance sheet date. Deutsche Post World Net Annual Report 2006

  • Page 153
    ... interest-related contracts Exchange-traded products Interest rate futures Interest rate options Total portfolio of interest rate derivatives Equity/index derivatives OTC products Equity options (long/short) Exchange-traded products Equity/index futures Equity/index options Total portfolio of equity...

  • Page 154
    ... active market for a financial instrument, the full fair value is expressed by the market or quoted exchange price; otherwise, the full fair value is calculated using investment techniques. Carrying amounts/fair values 2005 â,¬m Carrying amount Fair value 2006 Carrying amount Fair value Assets Cash...

  • Page 155
    ... assets represents the maximum default risk. The following table provides an overview of the derivative financial instruments used by Deutsche Post World Net (excluding the Deutsche Postbank Group), and their fair values. Consolidated Financial Statements Deutsche Post World Net Annual Report 2006

  • Page 156
    ... euro investments. These synthetic cross-currency swaps hedge the currency risk, and their fair values at the balance sheet date amounted to â,¬13 million (previous year: â,¬-3 million). The investments relate to internal Group loans which mature in 2014. Deutsche Post World Net Annual Report 2006

  • Page 157
    ... standard market terms and conditions. All companies classified as related parties that are controlled by Deutsche Post World Net or on which the Group can exercise significant influence are recorded in the list of shareholdings together with information on the equity interest held, their equity and...

  • Page 158
    ...business departments (second-level executives) and the members of their families. The following transactions were entered into between Deutsche Post World Net and related parties in fiscal year 2006: In two cases, members of the Supervisory Board received loans at standard market conditions totaling...

  • Page 159
    ...Williams Lea Inc. (Group)2) Deutsche Post Global Mail (UK) Ltd. Interlanden B.V. Deutsche Post In Haus Service GmbH Deutsche Post Customer Service Center GmbH Deutsche Post Selekt Mail Nederland C.V. EXPRESS/LOGISTICS DHL Express (USA) Inc. Exel Europe Ltd.3) DHL Express Vertriebs GmbH & Co. OHG Air...

  • Page 160
    ... cost benefits. Elements common to the businesses include the extensive joint delivery service outside city centers and shared points of sale in the form of the retail outlets. The decision still requires the approval of the respective bodies at Deutsche Post World Net. The company plans to start...

  • Page 161
    ... starting point of the reconciliation of the balance sheet, column 1 contains the data for Deutsche Post World Net including the fully consolidated Deutsche Postbank Group. Column 2 contains the IFRS balance sheet of the Deutsche Postbank Group that is excluded from the overall financial statements...

  • Page 162
    ... Consolidation of income and expense and intercompany balances 2006 (4) (5) Deutsche Post World Net (Postbank at equity) 2006 Deutsche Post World Net (Postbank at equity) 2005 restated Deutsche Post World Net 2006 â,¬m Deutsche Postbank Group 2006 Other 2006 Revenue Other operating income Total...

  • Page 163
    ... services Financial instruments Cash and cash equivalents Current assets EQUITY AND LIABILITIES Issued capital Other reserves1) Retained earnings1) Equity attributable to Deutsche Post AG shareholders Minority interest1) Equity Provisions for pensions and other employee benefits1) Deferred tax...

  • Page 164
    ...in companies Other noncurrent assets Interest received Postbank dividend Current financial instruments Net cash used in investing activities Change in financial liabilities Dividend paid to Deutsche Post AG shareholders Dividend paid to other shareholders Issuance of shares under stock option plan...

  • Page 165
    ... in consolidation, the accounting and consolidation principles used and significant estimates made by the Company's Board of Managing Directors, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides...

  • Page 166
    ...can be separated from universal services and offer special service features. Hub Main transshipment base. Collection center for the transshipment and Fast-moving consumer goods Everyday consumer goods that sell quickly. consolidation of ï¬,ows of goods. Deutsche Post World Net Annual Report 2006

  • Page 167
    ...transmits, receives and stores data using a transponder without the need for physical or visual contact. Philately The study of stamps. Systematic collection of postage stamps. Reverse logistics Return transport and utilization of products and materials. Deutsche Post World Net Annual Report 2006

  • Page 168
    ... Board Retail banking Return on sales Risk management 59 71 B Balance sheet 51 ff., 105, 112 ff., 124 ff., 157, 159 Board of Management Bonds Brand awareness Brands 18 f., 53, 84 ff., 90 f., 94 ff. 53, 59, 141 f. 27 16, 18, 80 Free ï¬,oat G Global Business Services 19, 37, 78, 118 Global Customer...

  • Page 169
    8-Year Review 8-Year-Review 1999 to 2006 â,¬m 1999 restated 2000 restated 2001 restated 2002 restated 2003 restated 2004 restated 2005 restated 2006 Revenue MAIL EXPRESS LOGISTICS FINANCIAL SERVICES SERVICES Divisions total Consolidation (until 2004 Other/consolidation) Total 11,671 4,775 4,450 2,...

  • Page 170
    ... share13), 14) Dividend distribution Payout ratio (distribution to consolidated net profit) Dividend per share13) Dividend yield (based on year-end closing price) (Diluted) price/earnings ratio before extraordinary expense17) Number of shares carrying dividend rights Year-end closing price millions...

  • Page 171
    ... annual report was published in German and English on March 20, 2007. Picture references Press and Information Office of the Federal Government Deutsche Post World Net picture database DHL USA Polar Air Cargo Photography Andreas Pohlmann Uwe Schossig John Wildgoose < Please open here Printed on...

  • Page 172
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