Leveraging market opportunities in mail business
Future demand for mail in Germany is essentially dependent on how the macroeconomic situation develops and to what extent alternative electronic media are used. We expect a further decline in the market for mail communication in the coming years. We will also lose market share as a result of the deregulation of the market and increased competition.

The German advertising market will continue to grow and the trend towards target group-oriented advertising will persist. Despite the continuing liberalization of the market for paper-based advertising, we intend to consolidate our position and even to develop it further in the advertising market as a whole. We therefore want to position ourselves as an integrated provider of cross-media services in the area of direct marketing.

The slight downwards trend in the press distribution market is expected to persist. Here too, our intention is to maintain and perhaps even to increase our share of the market. In this context, we attach great importance to the growing subscriptions segment. We are therefore expanding our reader service and improving its quality, for example with new procedures for correcting addresses.

We expect to see continued volume growth in the market for international mail. Further deregulation of foreign mail markets will open up new opportunities and will positively impact our development. We will persist in our strategy of positioning ourselves in all important markets, while increasingly focusing on value-added services in the mail business.

We will continue to optimize our transport network in 2006: we will reduce our overnight airmail network by two flights. In conurbations and adjoining highly populated districts, which are characterized by a high proportion of business customers and considerable fluctuations in daily volumes, the operating concept for standard mail delivery is being refined in order to optimize costs and quality. To achieve this, a procedure has been developed which has been undergoing testing since the start of 2006 in around 100 delivery districts and, if successful, will be extended. We have already laid the foundations for replacing the hand scanners that are used in the 30,000 or more joint delivery districts. This will allow us to support future requirements through the flexible use of technology.

Sharing in the growth of the express market
The international CEP market in Europe is expected to grow by an average of 4−6% per year. Additional volumes are anticipated mainly in intercontinental business to and from Asia and the emerging markets. We are well placed to exploit this growth and to continue to achieve good prices. We will also improve our range of services, for example by extending delivery before 12 noon in Europe and introducing it for shipments to and from Asia. In addition, we will continue to review and adjust the price-performance ratio of our products in the future. Business in the domestic markets is expected to grow more slowly than cross-border activities. In some countries, including Germany, new players are also expected to enter the parcel market.

We are working to improve the coordination of our operating processes still further, with the customer benefiting from the advantages of an integrated service. By the end of 2007, our customer network in Europe should reach around 20,000 contact points. A significant proportion will be the service points, which are located in supermarkets, train stations, and retail chains. These already allow shipments to be posted and collected in seven European countries. In the coming year, we want to install Packstations in more than 30 additional cities in Germany, thereby extending the network to over 120 cities in total.

In the United States, we aim to become more competitive and further improve our services. We want our customers to perceive us as the friendliest, most accessible, and particularly accommodating carrier on the market. To achieve this we will provide user-friendly technology. We want to increase earnings by placing greater emphasis on international and ad hoc customers, while at the same time retaining our existing customers. We want to expand our domestic product range.

We intend to develop additional express products in Asia and, as the first international express service provider on China’s and India’s domestic markets, we want to make further investments and grow quickly. DHL aims to become the employer of choice in the region.

In the emerging markets, we will gradually expand our product offering and further develop our sales activities to reflect the needs in the respective countries.

Assuming market lead in logistics
There will be a shift in the competitive dynamics of the logistics market due to the mergers that have already taken place. We expect that market consolidation will continue and that ultimately only a handful of global providers will remain. The consolidation process among freight carriers is expected to continue.

The acquisition of Exel has substantially broadened the scope of the LOGISTICS Corporate Division. We expect to have reached the most important integration stages by 2007. In future, we can offer more products with a greater geographic range. We will merge the two headquarters, institute joint procurement and consolidate the infrastructures of the two companies. The resulting cost savings should amount to around €220 million before taxes in 2008.

The ever-closer international integration of the procurement and sales markets will result in an increase in transportation volumes, especially in intercontinental traffic. We aim to increase our market share of those routes that link Europe and the United States with Asia, and above all with China. Average market growth of around 6 to 7% is forecast for air and ocean freight in the coming years. The highest growth rates continue to be expected from shipments sent from Asia to other regions as well as within the Asia Pacific region. We will increase our efficiency in air and ocean freight by grouping volumes and bundling freight to best effect. In air freight, we also intend to make greater use of DHL’s own freight capacities.

In contract logistics, customers expect tailored end-to-end solutions that bring them added value and go beyond the mere performance of logistics processes at low unit costs. In addition, providers with country-specific knowledge will be successful – which is why in this area of business we are focusing on industries and countries with a continuing trend towards outsourcing logistics services. The acquisition of Exel allows us to tap into geographic markets for contract logistics where we have so far been underrepresented. In future, we will increasingly be offering one-stop logistics services in the United Kingdom, the United States and Asia. This is an ideal complement to our strong presence on the European mainland.

Postbank improves strong market position
In 2006, we only anticipate a moderate economic upturn, which we believe will make it difficult for German banks to further improve their earnings significantly. The number of consumer insolvencies will increase further in the coming years, while a long-term improvement in the operating results of small and medium-sized companies will require a more substantial recovery in the domestic economy.

The acquisition of BHW represents another major step toward Postbank’s goal of establishing itself as the leading bank for retail customers in Germany. In future, Postbank will serve over 14.5 million customers in its home market – more than any other bank. It will be able to more than double its volume of private real estate financing and will also become the market leader in this segment. Postbank also plans to further increase its business from high-margin consumer loans and from products with a high consulting and advisory content, in order to position itself as an expert in the growth area of retirement provision.

The performance of its sales network will be boosted by the acquisition of 850 retail outlets and the addition of BHW’s 4,200 mobile financial advisors. Together with the 460 mobile advisors at Postbank Vermögensberatung, BHW’s cooperation partners and the direct sales channels via DSL agents, Postbank will continue to build on its leading position, aided by online and telephone banking.